Fortnightly - Nuclear Waste Fundhttp://www.fortnightly.com/tags/nuclear-waste-fund
enSpent-Fuel Fedcorphttp://www.fortnightly.com/fortnightly/2011/05/spent-fuel-fedcorp
<div class="field field-name-field-import-deck field-type-text-long field-label-inline clearfix"><div class="field-label">Deck:&nbsp;</div><div class="field-items"><div class="field-item even"><p>The Blue Ribbon Commission’s best answer for the nuclear waste dilemma.</p>
</div></div></div><div class="field field-name-field-import-byline field-type-text-long field-label-inline clearfix"><div class="field-label">Byline:&nbsp;</div><div class="field-items"><div class="field-item even"><p>John A. Bewick</p>
</div></div></div><div class="field field-name-field-import-bio field-type-text-long field-label-inline clearfix"><div class="field-label">Author Bio:&nbsp;</div><div class="field-items"><div class="field-item even"><p><b>John A. Bewick</b> is <i>Fortnightly’s</i> contributing editor and formerly was secretary of environmental affairs for the Commonwealth of Massachusetts. He holds advanced degrees in nuclear science and business management.</p>
</div></div></div><div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">Fortnightly Magazine - May 2011</div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>For America’s nuclear power operators, the future looks more uncertain than it has for almost 30 years.</p>
<p>Among all the complex political, financial and technical issues affecting the country’s nuclear future, the spent-fuel dilemma has proved to be one of the most difficult. However, just as the Department of Energy’s Blue Ribbon Commission on America’s Nuclear Future (BRC) prepares to issue its recommendations for a new approach to spent-fuel management, the Fukushima disaster has focused tremendous public attention on nuclear risks—adding pressure to a problem that already was nearing critical mass.</p>
<p>With the insistent media focus on details of the Fukushima-Daiichi failure, American citizens have learned that spent nuclear fuel pools aren’t protected by containment, and that many such pools have exceeded their designed capacity. This awareness has increased fear of radiation exposure, and fueled growing opposition to nuclear power. Recent polls show support for nuclear power has diminished drastically since before the Fukushima disaster. <i>(See “Nuclear Power in US: public support plummets in wake of Fukushima crisis,” Christian Science Monitor, March 22, 2010)</i>.</p>
<p>This change in support arrives just one year after President Barack Obama abruptly canceled the Yucca Mountain project, leaving DOE without a credible long-term plan for the permanent disposal of U.S. spent nuclear fuel, pursuant to its obligations under the Nuclear Waste Policy Act (NWPA) of 1982. Lawsuits filed by nuclear operators claim damages now reaching $1.8 billion, with the federal government’s legal exposure to such litigation projected to balloon to more than $13 billion over the next decade. According to Kim Cawley with the Congressional Budget Office, each year of delay adds between $300 and $400 million in liabilities to the budget deficit, at a time when Congress is paying intense attention to deficits.</p>
<p>In this context, public trust and confidence in nuclear power seems unlikely to be restored unless, among other things, the federal government defines a credible path forward for developing a repository for spent nuclear fuel. Tasked with finding this path forward, the BRC has been engaged in hearings and technical investigations for more than a year, with draft recommendations expected to be released this summer. Sources tell <i>Fortnightly</i> the BRC likely will advise the federal government to create a new entity to manage disposal of spent nuclear fuel—probably a federal corporation (fedcorp) modeled on TVA.</p>
<p>A spent-fuel fedcorp could remove the constraints of the annual congressional budget cycle, allowing predictable annual financial support and improving the odds that a safe and effective future can be crafted for long-term management of depleted fuel rods and other radioactive materials. Similar approaches in Sweden and Finland have succeeded in moving their spent-fuel storage projects toward construction. And such a fedcorp—the Nuclear Fuels Management Corp.—was proposed in Congress by Sen. George Voinovich (R-Ohio, now retired), first in 2008 ((S.3661), <i>The United States Nuclear Fuel Management Corporation Establishment Act of 2008</i>), and most recently last year (S.3322), with a companion bill sponsored by Rep. Fred Upton (R-Mich.), who now chairs the House Energy &amp; Commerce Committee.</p>
<p>Although the Fukushima crisis might have delayed or even ended the nuclear renaissance, it also has intensified the urgency of fuel-cycle issues. “Spent fuel is one issue that has been on the table in this country for a long time,” Voinovich told <i>Fortnightly</i>. “It has ping-ponged back and forth, and it’s now time to deal with it forthrightly.”</p>
<h4>Why Fedcorp?</h4>
<p>Federal agency management of such a large and complex project through the Department of Energy has failed to produce a spent-fuel storage solution, although the last 20 years have seen many attempts. Numerous factors have conspired to prevent a successful outcome.</p>
<p>First, annual appropriations by Congress fail to insure a consistent level of funding, as priorities within Congress change over time. Plus, executive-branch priorities also change over time; the spent-fuel project has rarely been considered a major federal priority in the last 20 years. It has never been a primary focus of DOE, whose mission is large and complex with multiple priorities.</p>
<p>Moreover, the skill sets at government agencies are different from those in business. As such, DOE’s people arguably lack the expertise, experience and background needed to manage and complete large construction projects.</p>
<p>Also, the siting process adopted by Congress in 1987 proved to be flawed when Congress chose the Yucca Mountain site without adequate technical knowledge of the specifications for such a site or of the geological characteristics of the site. Additionally, by dictating the site without sufficient involvement of either the local or state communities affected, the government generated instant opposition to the project—and that opposition has been unremitting. The ultimate consequence of this choice was the cancellation of the Yucca Mountain project. But more broadly, a top-down federal siting process that discounts local control or input has added to general public resistance to such facilities, and makes it unlikely that other locations will welcome what’s perceived as a national hazardous-waste dump.</p>
<p>Further, designing and constructing the facility turned out to be more technically complex than anticipated, perhaps because there was an assumption it would be easy compared with designing, building and operating a nuclear power plant. But whatever the reason, unexpected technical challenges increased development costs, and pushed Yucca Mountain’s schedule beyond a horizon that could receive consistent support by a federal government that tends to change hands approximately every four years.</p>
<p>Finally, DOE’s failure to begin accepting spent nuclear fuel as required by the NWPA has added to public distrust of nuclear power, since the public sees no credible solution for long-term disposal of spent fuel in a geologically safe environment.</p>
<p>A spent-fuel fedcorp could bring a fresh approach to decision making, and it would benefit from a more stable, long-term funding framework. Additionally, the idea of a fedcorp, at least in principle, enjoys strong support from the industry and its lawmakers. The Nuclear Energy Institute (NEI), representing the utilities that own nuclear power plants, favors the fedcorp model <i>(See “Rethinking Spent Fuel,” February 2011)</i>. Some prominent state regulators are on the record supporting a fedcorp, including Michigan Public Service Commissioner Greg White; and of course the current chairman of the House Energy Committee co-sponsored the Voinovich bill.</p>
<p>However, by itself, a federal corporation structure shouldn’t be considered any guarantee of success, as the failures and foibles of some federal entities have illustrated. The U.S. SynFuels Corp. of the early 1980s provides an instructive example. The project to produce synthetic fuels, primarily from coal, lost its mission when its primary driving force vanished—<i>i.e.</i>, the energy crisis ended, and petroleum prices dropped below the cost of the new fuels to be produced. And another example, Amtrak, continually suffers from the uncertainties of annual congressional appropriations.</p>
<p>There are, however, successful examples of corporations created as public entities with policy direction from Congress, such as the Tennessee Valley Authority (TVA) or more recently the U.S. Enrichment Corp. (USEC)—which was formed by the federal government in the early 1990s, and privatized in 1998.</p>
<p>Both successful and unsuccessful examples provide useful lessons. Several key steps stand out as being critically important in the effort to create a successful fedcorp to manage spent nuclear fuel.</p>
<h4>Step 1: Policy Mandate</h4>
<p>A central question for any new government corporation involves resolving how policy is set, and what functions and responsibilities accrue to the entity. In short, would the fedcorp be expected to craft policy on managing spent fuel, or would it receive such policy from the government?</p>
<p>Jack Bailey, TVA’s director of nuclear operations, argues that Congress and the administration—and not the board of a nuclear fedcorp—must bear the responsibility to establish America’s spent-fuel policy.</p>
<p>“We wouldn’t advocate that this fedcorp in any way establish policy,” Bailey says. “They are merely a tool to implement policy. That direction comes from the administration or the Nuclear Waste Policy Act, or some other legislative vehicle to establish overall policy.”</p>
<p>Bailey does, however, specify functions to be carried out by the fedcorp. “The [fedcorp’s] board—and the management that it would hire—need the flexibility to implement policy as best they see fit, and to manage the money that’s put into the fund in a way that’s most efficient toward achieving the results of the corporation.”</p>
<p>In other words, the fedcorp’s mandate should be firmly established—but it should also give the fedcorp the flexibility it needs to get the job done right.</p>
<h4>Step 2: An Independent Board</h4>
<p>Like any successful corporation, a nuclear waste fedcorp would need strong governance and management expertise. “The board structure needs to include people who understand business,” Bailey says. “It can’t all be political appointees, for example, who have really no knowledge or interest in the business.”</p>
<p>Additionally the fedcorp board should include representation from major stakeholder groups, who will ensure the corporation is directed and managed in an independent way. According to Bailey, TVA has been most successful “when the board has had the ability to act on behalf of its mission without having to worry about a lot of extraneous things, whether they be political or other issues.”</p>
<p>Of course, nuclear waste policy is an intensely political subject, and the fedcorp would need people capable of managing the public-interest aspects of the corporation’s mission.</p>
<p>Some witnesses speaking before the BRC advocated having representatives of the public on the fedcorp board. Others suggest this might be unnecessary, and that simply ensuring proper regulatory oversight by the NRC and EPA would satisfy the need to ensure fair and impartial review of the corporation’s actions. “Remember, any decision [the board members] make is going to be under the National Environmental Policy Act (NEPA), which requires them to engage the public and the environmental groups that might be concerned,” Bailey says. “So it’s going to be a very public process.”</p>
<p>Also, last year’s Voinovich bill specified that the National Association of Utility Regulatory Commissioners (NARUC) would contribute two members to the proposed board of directors. This provision was intended to ensure the interests of customers and state governments are represented in the fedcorp’s decisions.</p>
<h4>Step 3: Independent Funding</h4>
<p>Assuring the continuity of funding from year to year is the most compelling reason to create a new entity that has direct access to the annual revenues from the Nuclear Waste Fund. Without such funding, consistent progress on construction of a repository can’t move forward at a reliable pace. It’s important for public reassurance and to support the huge, long-term financial commitments involved in constructing a spent-fuel repository—and not let the constantly shifting political winds in Washington affect those commitments.</p>
<p>The Nuclear Waste Fund has been the designated repository for ratepayer and utility fees since 1982, with accrued funds (allocated within the federal budget) of about $25 billion, and annual payments of about $750 million. To date, about $10 billion has been spent toward the construction of a permanent repository, mostly on Yucca Mountain.</p>
<p>Both the corpus of the Nuclear Waste Fund and the ongoing ratepayer payments logically might become the principal financial assets of a nuclear waste fedcorp. But transferring either accrued funds or annual contributions to a new fedcorp entity isn’t a trivial matter. For one thing, the Nuclear Waste Fund is earmarked for a permanent repository—as opposed to other options, such as interim storage or on-site casks, for example. Allowing the fedcorp to pursue the most pragmatic approach might require some legislative changes in the fund’s charter.</p>
<p>But perhaps more importantly, the fund presents a difficult budgeting matter for Congress and the Office of Management and Budget (OMB). The issue has caused difficulties for previous efforts at reforming the way the federal government manages the Nuclear Waste Fund. In April 2006, DOE Secretary Samuel Bodman proposed an ambitious plan for managing nuclear spent-fuel and high-level waste, and that plan ran aground reportedly in part because OMB objected to transferring dollars from the Nuclear Waste Fund out of the federal balance sheet. “Funding reform is necessary to correct a technical budgetary problem that has acted as a disincentive to adequate funding,” Bodman stated.</p>
<p>The issue hasn’t improved since 2006. In testimony before the BRC in February, Mike Telson, DOE’s former chief financial officer, said his budget committee and the OMB had engaged in “Talmudic” discussions of this issue—implying such discussions were complex and could’ve gone on forever. Likewise Joe Hezir, a senior official at OMB for decades, explained that budgeting rules have become more restrictive and adverse in the context of transferring funds to a fedcorp. He said:</p>
<p>Such budget conflicts, however, aren’t necessarily deal killers for funding a spent-fuel fedcorp. Bailey of TVA, for example, argues that the $25 billion corpus of the Nuclear Waste Fund isn’t immediately needed to initiate a fedcorp. Annual ratepayer fees would be adequate to get the fedcorp started, and the government could transfer the corpus of the fund to the fedcorp books later—or even leave the fund where it is, and use that fund <i>in situ</i> as an asset to secure bonds issued for financing the fedcorp’s work.</p>
<h4>Step 4: Defined Liabilities</h4>
<p>The major liability that arises in creating a fedcorp involves the federal government’s failure to meet its obligations under the NWPA to assume responsibility for managing spent fuel beginning in 1998. Several utilities and state regulatory agencies have successfully sued the government for compensation arising from its violation and their additional costs for onsite spent-fuel storage. Exposure to this liability would prove problematic for a spent-fuel fedcorp.</p>
<p>In his BRC testimony, Phil Sewell, senior vice president of USEC, reinforced the need to be precise in identifying liabilities and assets as a key component of a making a new fedcorp successful. Further, Bailey of TVA says that no matter where the responsibility lands, paying the federal government’s damages from the waste fund would be indefensible from a legal and policy standpoint. “Essentially [it would be] asking the utilities to pay for their own lawsuit victory,” he says. “Because the money they’re taking is the money we’re paying in. That makes no sense at all.”</p>
<p>And indeed, a federal court in 2002 ruled that settlements from these suits must come out of the Department of Treasury judgment fund, rather than from the Nuclear Waste Fund.</p>
<p>But a fedcorp could also find itself holding the bag for other federal liabilities. For example, DOE has spent more than $7 billion on Yucca Mountain, and that work carries certain liabilities and responsibilities. Arguably they rest with DOE, and not a new entity without any involvement at Yucca Mountain.</p>
<p>If a fedcorp is created, however, then at some point in the future it will assume liability under the NWPA for the federal obligation to take spent nuclear fuel. So in defining fedcorp’s liabilities, policy makers will need to establish a reasonable timeline during which NWPA liabilities transfer to the fedcorp.</p>
<h4>Step 5: Collaborative Approach</h4>
<p>The existing siting process, established by Congress in 1987, hasn’t worked. Instead, it has generated strong opposition from the State of Nevada, led by Senate Majority Leader Harry Reid (D-Nev.). Also, problems that were unknown when the Yucca Mountain site was selected—including water intrusion and cracks in the mountain—have raised issues about its appropriateness as a repository that must, in effect, last forever.</p>
<p>The BRC held hearings at locations that illustrate both success and failure at siting similar facilities. Their investigations took the BRC to Europe and across the United States, and included testimony from many experts on siting issues—as well as from those who express grave concerns and fears about such siting. Almost universally, public officials—from mayors to governors to state legislators—demand a say in approving such sites. Some demand a binding veto. Others ask for a permitting role. Some want the Congress to dictate a site, while others urge a competition from local communities and states for a site with huge financial bonuses—as was the case in Sweden and Finland, where there has been permanent repository siting success <i>(see “<a href="http://www.fortnightly.com/fortnightly/2010/11/life-after-yucca">Life After Yucca</a>,” November 2010)</i>.</p>
<p>In any case, a spent-fuel fedcorp seems likely to succeed only if it can develop a new, collaborative approach to siting nuclear waste facilities. Also, to the degree the fedcorp considers interim storage options, it would need some way to establish credibility that “interim” isn’t a euphemism for “permanent” <i>(see “Tough Questions for Fedcorp”)</i>.</p>
<p>In the <i>Plan D for Spent Nuclear Fuel</i> report—produced by a group of academics, led by Prof. Clifford Singer at the University of Illinois at Urbana-Champaign—a key recommendation is that “every shipment of spent nuclear fuel material should be accompanied by a payment into a Permanent Fund, to be held by the recipient state as long as that material stays in the state… States would receive interest earnings on the Permanent Fund balance beyond any needed to maintain the minimum balance.”</p>
<p>The <i>Plan D</i> report also argues against a single long-term storage site—<i>e.g.</i>, the so-called “monopoly” approach that failed at Yucca Mountain. “A monopoly situation would generate tension within the state and with the federal government over whether the state had obtained adequate compensation,” Prof. Singer wrote. “This could lead to delays or even failure of the whole project again.” He suggested that a more successful process might involve about six finalist states, competing for two or preferably three repository site licenses—with an equal number of spent-fuel aging facilities to be licensed at repository sites.</p>
<h4>Clean Slate</h4>
<p>If the BRC recommends the federal government create a fedcorp to take over the process of siting a repository for spent nuclear fuel, it could establish a clean slate for resolving America’s nuclear waste dilemma. Properly structured, a fedcorp would allow a more rational and sustainable approach to the problem.</p>
<p>However, in order for it to succeed, the mission of such a fedcorp must be clearly defined, its powers carefully delineated, and its financing constructed so as to avoid the delays that have hampered DOE efforts to date.</p>
<p>A spent-fuel fedcorp would face a panoply of complexities in management, funding, legislative authority and structure, as well as legal and financial liabilities—and that’s before it even considers the technical and operational issues of siting, building and running nuclear waste facilities. This combination of complexities and difficulties has stymied progress by the DOE, but a dedicated fedcorp that’s more flexible and sustainably financed might be better positioned to tackle this generational challenge.</p>
<p>And now might be precisely the right time for the fedcorp idea.</p>
<p>A convergence of failures—<i>i.e.</i>, the accident at Fukushima, the cancellation of Yucca Mountain as a permanent repository for spent fuel, and the growing budget impact of litigation settlements related to DOE’s non-performance on its NWPA obligations—already represents a call for action on the safe storage of spent fuel. If proponents of a fedcorp approach are correct, a forthcoming BRC recommendation—and a federal decision to act upon it—could begin the process of turning these failures into a new beginning for America’s policy on nuclear spent fuel.</p>
</div></div></div><div class="field-collection-container clearfix"><div class="field field-name-field-sidebar field-type-field-collection field-label-above"><div class="field-label">Sidebar:&nbsp;</div><div class="field-items"><div class="field-item even"><div class="field-collection-view clearfix view-mode-full"><div class="entity entity-field-collection-item field-collection-item-field-sidebar clearfix">
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<div class="field field-name-field-sidebar-title field-type-text field-label-above"><div class="field-label">Sidebar Title:&nbsp;</div><div class="field-items"><div class="field-item even">&lt;b&gt;Fedcorp: Key Elements &lt;/b&gt;</div></div></div><div class="field field-name-field-sidebar-body field-type-text-long field-label-above"><div class="field-label">Sidebar Body:&nbsp;</div><div class="field-items"><div class="field-item even"><!--smart_paging_autop_filter--><!--smart_paging_filter--><p>When Philip G. Sewell, senior vice president of U.S. Enrichment Corp., testified before the Blue Ribbon Commission on America’s Nuclear Future in February 2011, he addressed what he considered to be the key elements for the establishment and operation of a successful government corporation. They included legislation, corporation assets, existing contracts, the role of the U.S. Treasury, delineation of liabilities, a regulatory oversight path, strong management, and a viable cost structure. Sewell advised:</p><p>• The enacting legislation must be thorough enough to provide the corporation with legal standing to perform its business, establish a strong and independent corporate governance structure, and provide it with means (financial, personnel, regulatory) to be an effective business.</p><p>• The transfer of assets and a clear definition of the value of those assets is necessary to support the organization’s future viability.</p><p>• The government must transfer existing contracts (<i>i.e.</i>, customer, power, services) on favorable enough terms to support business operations.</p><p>• The role of the U.S. Treasury in the management of the corporation’s assets, cash and returns to the government must be defined.</p><p>• There must be a clear delineation of liabilities between the government and the new corporation.</p><p>• A clear regulatory oversight path for immediate term and long-term management of spent nuclear fuel must be established.</p><p>• The new entity needs a strong mix of experienced managers from private and government sectors.</p><p>• There must be a viable cost structure that will support its operations.–JB</p><p> </p></div></div></div> </div>
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<div class="field field-name-field-sidebar-title field-type-text field-label-above"><div class="field-label">Sidebar Title:&nbsp;</div><div class="field-items"><div class="field-item even">&lt;b&gt;Tough Questions for Fedcorp &lt;/b&gt;</div></div></div><div class="field field-name-field-sidebar-body field-type-text-long field-label-above"><div class="field-label">Sidebar Body:&nbsp;</div><div class="field-items"><div class="field-item even"><!--smart_paging_autop_filter--><!--smart_paging_filter--><p>Policy makers considering possible approaches to creating a spent-fuel fedcorp face a critical question, whose answer could spark a potential firestorm of controversy. Specifically, would the fedcorp be authorized to consider all the possible ways to deal with spent fuel, or would its mandate allow only a narrow set of acceptable solutions?</p><p>If the fedcorp gets a broad mandate, then it will have to consider two fundamental questions. First, should we recycle our spent nuclear fuel, the way they do in France and other countries? And second, should storage options include only the possibility of a permanent repository like Yucca Mountain, or should we consider potential interim-storage solutions.</p><p>With regard to the first question, the prospect of recycling or reprocessing spent fuel opens the door to a complex and provocative debate. Specifically, current reprocessing systems are too expensive to be justified on a purely economic basis; in other words, fresh fuel is much cheaper than recycled fuel, even when avoided disposal costs are factored into the price. However, the other side of the argument suggests that current economics might not prevail. Following this rationale, recycling should be part of a long-term plan for spent-fuel management, if only because nuclear fuel represents a finite resource. At the very least, any approach to managing spent fuel shouldn’t foreclose the future possibility of reclaiming the large remaining energy value in stored nuclear waste.</p><p>George Dials, executive vice president of B&amp;W Technical Services Group and former director of the DOE Carlsbad Field Office, told the Blue Ribbon Commission on America’s Nuclear Future (BRC), “I truly believe we are going to need all the energy in the used nuclear fuel that we have in the long-term future for this country.” In his written testimony, Dials stated that a once-through disposal solution “is counter to establishing a complete, closed nuclear fuel cycle… [W]e must establish a commercial nuclear fuel reprocessing/recycling enterprise to sustain our nuclear power capabilities.”</p><p>In addition to hearing such testimony, the BRC visited nuclear power plant facilities in France, and learned about Areva reprocessing technology and facilities in that country. If those actions provide any clue, it’s possible the BRC’s recommendations will at least leave open the door to reprocessing as a solution for future consideration.</p><p>However, economic viability isn’t the only issue affecting the recycling option. The other major issue is proliferation risk. To the degree reprocessing yields plutonium (Pu), it triggers a complex set of policy questions—not only domestic policy, but also U.S. obligations under international non-proliferation treaties dating back to 1969.</p><p>The Blue Ribbon Commission discussed reprocessing spent fuel and proliferation concerns at a hearing in October 2010. Although the hearing spawned many disagreements, one clear fact emerged: If and when a fedcorp addresses the question of whether to pursue reprocessing on any level, then it also will face the question of how to deal with proliferation concerns. As James M. Acton of the Carnegie Endowment for International Peace told the BRC, “This fuel cycle choice would send the message that reprocessing was an essential part of a modern nuclear energy program and enhance the risk that other states would develop PUREX”—<i>i.e.</i>, technologies that produce Pu as a by-product.</p><h4>Interim vs. Permanent</h4><p>In principle and in statute, U.S. policy on spent-fuel management requires the federal government to assume possession of commercial nuclear waste and manage it in a permanent repository. In practice, however, U.S. nuclear operators are storing almost all of their spent fuel onsite—much of it in pools of water, and some in dry casks. Although water pools are supposed to provide only temporary quarters to allow fuel rods to cool down, dry casks are considered an interim solution, which allows nuclear generation to continue while a permanent repository is developed.</p><p>Now, a key question affecting a nuclear waste fedcorp will be whether it can only build permanent storage, or whether one or more centralized interim storage facilities are allowable. Interim storage offers some important advantages—namely an interim facility can be built much more quickly than a permanent repository, and it would provide breathing room for policy makers to define workable long-term solutions—<i>i.e.</i>, either spent-fuel reprocessing, permanent geologic sequestration, or both.</p><p>On the other hand, interim storage would add substantial costs and potentially contentious transportation requirements to the overall challenge of managing spent fuel. It also creates the perception—and arguably the reality—that interim sites would become <i>de-facto </i>permanent sites, posing long-term security and public health concerns. Rather than solving the problem, interim storage might in effect be nothing more than a costly exercise in reshuffling.</p><p>The BRC considered these issues in its deliberations before the Fukushima crisis happened. Since then, risks involving onsite storage of spent fuel have been exposed to the glare of public attention—adding pressure to the BRC’s mission and perhaps changing its perspective on how to prioritize various options.</p><p>In short, the Fukushima disaster has raised a sense of urgency about resolving spent-fuel issues, and potentially driving the BRC—and any prospective nuclear waste fedcorp—toward solutions that reduce the risk of radioactive releases sooner rather than later.–JB and MTB</p></div></div></div> </div>
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Sun, 01 May 2011 04:00:00 +0000puradmin14108 at http://www.fortnightly.comNews Digesthttp://www.fortnightly.com/fortnightly/1998/11/news-digest
<div class="field field-name-field-import-byline field-type-text-long field-label-inline clearfix"><div class="field-label">Byline:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Lori A. Burkhart, Phillip S. Cross and Beth Lewis</p>
</div></div></div><div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">Fortnightly Magazine - November 1 1998</div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p> Federal Agencies </p>
<p> NOX EMISSIONS. Generating heavy criticism from industry, on September 24 the Environmental Protection Agency released its long-awaited final rules on nitrogen oxide emissions, outlining a plan to reduce NOx by 28 percent by year 2007 in some 22 states and the District of Columbia, with state implementation plans due by September 1999 and controls in place by 2003, to be carried out through a "cap and trade" program to buy and sell NOx emissions credits. </p>
<p> In its analysis of cost-effectiveness, the EPA identified NOx control costs for fossil-fired steam electric generating units producing power for sale using several different control levels, settling on a level of 0.15 lb/MMbtu, yielding an average cost of $1,503 per ton, well under the threshold of $2,000 that it deemed cost effective. The rules set up a separate control category for boilers and turbines that generate electricity for private internal use. Download the rule at <a href="http://www.epa.bov/ttn/oarpg">http://www.epa.bov/ttn/oarpg</a>, pending publication in Federal Register. </p>
<p> NUCLEAR PLANT DECOMMISSIONING. Rejecting a framework proposed by the Nuclear Energy Institute, which appeared more lenient, the Nuclear Regulatory Commission issued final rules to reconcile the safety of funds for nuclear plant decommissioning, with the prospect that nuclear plants may face shutdown or a failure to recover costs under industry restructuring and competition. </p>
<p> The rules restrict use of a sinking fund method for "electric utilities," defined as those licensees who can still recover decommissioning costs through regulated rates or other mandatory charges even after competition. The rules force nonqualifying licensees to offer prepayment or up-front assurance to guarantee funding, But the NRC acknowledged "there are likely to be limits on the availability of surety mechanisms" (e.g., letters of credit, lines of credit, surety bonds, etc.). By contrast, the NEI framework would have allowed "nonutility" licensees to qualify for the sinking fund method on satisfying a set of financial criteria, but the NRC said that proposal would carry "greater risk." Other issues in the rule: </p>
<p> • Accelerated Methods. Rejects idea of accelerated funding for all plants over a defined period (to cover the possibility of premature shutdown at some plants), calling plan too arbitrary and prone to wide variations in impacts on licensees. </p>
<p> • Power Sales Contracts. Rejects use of power sales contracts for financial assurance, noting that contracts, plagued by contingencies and litigation, are not equivalent to a government-mandated revenue stream. </p>
<p> • Insurance Pool. Rejects concept of captive, government-managed insurance pool to pay unfunded decommissioning costs, noting that pool members would compete and could shift costs to competitors through pool administration. "An insurance pool would offer no incentive to licensees to reduce the magnitude of their potential claims on the pool." </p>
<p> • Site-specific Issues. Defers decision on using site-specific cost estimates until NRC can collect more data. </p>
<p> • Securitization Ideas. NRC appears to reject proposal to use securitization of a licensee's interest in the payment stream of non-bypassable regulatory surcharges as a vehicle for funding assurance. It says that the proposal to use securitization implies somehow that non-securitized transition surcharges will prove insufficient: "This ¼ seems at odds with the plain meaning of the definition of nonbypassable surcharges." </p>
<p> • Regulatory Certification. Rules dismiss possibility of using certification by the Federal Energy Regulatory Commission or a state PUC to establish sufficiency of funds. </p>
<p> • TVA, Federal PMAs. Rules define term "federal licensee," but do not affect current financial assurance of Tennessee Valley Authority, the only current federal licensee for a nuclear power reactor. NRC says it "will review" TVA's funding. </p>
<p> • Responsible Party. Rules impose duty on both owners and plant operators to guarantee sufficiency of funding. NRC says rule won't likely affect industry reliance on operating service companies, since they can negotiate funding assurance with reactor owners. </p>
<p> • Accounting. Rules decline to use the unfinished exposure draft issued by the Financial Accounting Standards Board on closure and removal of long-lived assets as an accounting or reporting standard, noting that ultimate FASB action could not be predicted and appeared "delayed for a considerable time," warranting a search for an alternative standard. </p>
<p> For self- or parent-company guarantees, the NRC adopted a framework for funding assurance based largely on a financial test developed 15 years ago by the Environmental Protection Agency. It refused to refine that test, explaining that "deregulation is still in its earliest phases [so] it is not yet possible to identify or define the financial characteristics of entities that may ultimately be responsible for reactor decommissioning." 63 Fed.Reg. 50465, Sept. 22, 1998. </p>
<p> NUCLEAR LICENSE TRANSFERS. The Nuclear Regulatory Commission also has proposed rules to streamline hearings for approval of transfers of reactor or materials licenses. It noted a large recent increase in transfers due to mergers, and concluded that the only real issue in such cases is whether the license amendment accurately reflects the transfer, and does not involve operating methods or a "significant hazards consideration." 63 Fed.Reg. 48644, Sept. 11, 1998. </p>
<p> Electric Reliability </p>
<p> PACIFIC NORTHWEST. With a study from Bonneville Power Administration warning that the Pacific Northwest could experience winter power shortages of over 6,000 MW if water flows on the Columbia River should drop to historic lows, the Northwest Power Planning Council on September 1 launched an investigation of strategies to ensure reliable power supplies. </p>
<p> BP predicts that potential power deficits could exceed import capabilities, made up primarily of high-voltage power lines that connect the Northwest with the Southwest. According to NPPC member Tom Karier, "With restructuring of the electric industry, it is less clear who will have the incentive or the responsibility to address those shortages." The NPPC will consider a range of remedies, including investments in new power plants, energy conservation measures, and development of new power pricing policies. </p>
<p> Studies &amp; Reports </p>
<p> MARKETER PERFORMANCE. The international consulting firm Frost &amp; Sullivan has issued a new report, North American Wholesale Energy Marketers, examining the performance in 1997 of the top 20 North American companies in natural gas and power marketing. For more information contact Kathleen Cooney at (650) 237-4358. </p>
<p> ELECTRIC GENERATION. The Gas Research Institute released Electric Generation Sector Summary, predicting that average real electric prices will fall by more than 25 percent by 2015. The study (GRI-98/0009) marks one of a series from GRI's Baseline/Gas Resource and Analytical Center, and examines state and federal regulations for both electric and gas utilities, plus environmental laws and technology issues. Address questions or GRI's Chicago office at fax (630) 406-5995, or to Val Megginson (703) 526-7832; fax (703) 526-7808; or e-mail: <a href="mailto:vmeggins@gri.org">vmeggins@gri.org</a>. </p>
<p> GENERATING FUELS. According to a new report by the DOE's Energy Information Administration, Challenges of Electric Power Industry Restructuring for Fuel Suppliers, electric utility restructuring could force cost cutting and consolidation in the coal industry, which now fuels 56 percent of utility power generation, representing 87 percent of all domestic coal consumption. The EIA adds that the share of nuclear-fired capacity (21 percent of domestic generation) will likely decline, along with the share for renewables (other than hydropower), making way for more gas-fired capacity, putting pressure on gas prices. See the EIA's Internet site at: <a href="http://www.eia.doe.gov">http://www.eia.doe.gov</a>. </p>
<p> CONSUMER AWARENESS. Branko Terzic, just before stepping down as chairman, president, and CEO of Yankee Energy Systems, Inc. on September 10 released the results of the third annual survey of consumers perceptions on deregulation, commissioned by Yankee Energy System through its subsidiary, Yankee Gas Services Co., and carried out by ICR Survey Research Group. </p>
<p> The number of U.S. citizens aware of deregulation has increased from 22.9 percent in 1996 to 38.1 percent at present. But as Terzic pointed out, "more surprising to us on the policy level is that six out of ten Americans are not aware." Respondents were almost evenly split over whether electric and gas deregulation would benefit them. A majority of respondents (60.6 percent) either did not know of any benefits (30.8 percent) or thought there would be none (29.8 percent). But more Americans felt this year that electric deregulation would lead to lower rates (46 percent) than they did two years ago (37.8 percent). </p>
<p> Significant regional differences surfaced in consumer awareness (highest in the West, lowest in the South), reflecting restructuring activities in those areas. According to Terzic, consumer awareness is directly related to publicized activity within the state. </p>
<p> Courts </p>
<p> INDUSTRIAL ELECTRIC RATES. A North Carolina appeals court, affirming a state commission ruling, has denied a request by a ratepayer advocacy group to investigate whether Carolina Power and Light Co. was earning returns above authorized levels since the utility's last rate case, decided in 1998, which set return on equity at 12.75 percent. It ruled that passage of time after a utility's rate case, standing alone, does not require a rate review. It added that uncertainty over electric restructuring "will tend to drive up the return expectations of investors," and also noted a warning from the commission staff that new rate investigation could backfire, leading to unintended rate increases or rate realignments detrimental to non-industrial customers. N.C. Utils. Comm'n v. Carolina Industrial Group for Fair Utility Rates, No. COA97-498, 1998 WL 548961, Sept. 1, 1998 (N.C.App.). </p>
<p> DSM COSTS. Reversing a circuit court order, the South Carolina Supreme Court has overturned a decision by the state public service commission that had allowed Piedmont Natural Gas Co. in 1995 rate case to annualize and recover expenses for demand-side management that were incurred after the test year without submitting a cost-benefit analysis, as had been required under a stipulation in a 1995 approving company's integrated resource plan. The stipulation had said that a failure to achieve projected benefits should not require disallowance for costs for any one specific DSM program, but the court ruled that the cost-benefit analysis was a threshold requirement for any cost recovery. Porter v. S.C.P.S.C., No. 24833, 1998 WL 567831, Aug. 31, 1998 (S.C.). </p>
<p> State PUCs </p>
<p> GAS TRANSPORTATION TARIFFS. The New York Public Service Commission has asked for comments on a staff proposal to impose a new basic tariff structure for the transportation of natural gas used for electric generation to reduce the inherent disadvantage of competitive power producers against combined electric and gas utilities, which may transfer some of their gas transportation earnings to their generating operations under share-the-savings programs. The tariff would include three components: (1) a uniform statewide fixed-cost charge of 10 cents per dekatherm; (2) a utility-specific marginal cost charge of between 7-15 cents per Dth; and (3) a value-based adder, initially set at zero, designed to measure real-time changes in spark spreads, or the relationship between the market price of electricity and the cost of gas for generation. Case 98-G-0122, Sept. 24, 1998 (N.Y.P.S.C.). </p>
<p> GAS CAPACITY RELEASE. In a combined electric and natural gas rate case, the Wisconsin Public Service Commission has decided when Northern States Power Co. of Wisconsin can use a gas cost recovery mechanism to keep for its stockholders a 25-percent share of revenues earned above target levels for seven different types of transactions that release excess gas system capacity. The PSC refused to distinguish between swaps, loans, or buy-sell agreements. Instead, it said it would extend GCRM sharing only to "opportunity sales," defined as the sale or release of the utility's unused or underutilized capacity entitlements that become available periodically because of variable daily and seasonal needs. </p>
<p> It also told NSP-W to remove certain gas supply costs from distribution rates, including personnel costs, carrying costs for storage, and the portion of gross receipts taxes based on gas sales revenues. No. 4220-UR-110, Sept. 16, 1998 (Wisc.P.S.C.). </p>
<p> ILLINOIS ELECTRIC RESTRUCTURING. The Illinois Commerce Commission has submitted final proposed rules to the state legislature on electric utility reliability and marketing affiliates, while the commission staff has also issued draft rules for comment on certification of ARES (alternative retail electric suppliers) and functional separation of delivery services from generation: </p>
<p> • Reliability. Utilities must file annual reliability reports comparing frequency and duration of service interruptions for their own customers versus those of other utilities or ARES. Also must design administrative procedure to resolve and pay claims for actual damages or economic replacement value in case of interruptions. Nos. 98-0013, 98-0035, Sept. 10, 1998 (Ill.C.C.). </p>
<p> • Utility Affiliates. Strict, broad-reaching rules cover utility affiliates that compete against ARES, as well as utility affiliates operating within the utility's service territory engaged in brokering, wholesale marketing, or offering consulting services (as an energy service company). Rules bar joint marketing, but utility affiliates can use parent's corporate name or logo in competing against an ARES, and may share so-called "corporate support services" with affiliates without sanction, though the rules define that term too narrowly, according to some Illinois utilities who intervened in the case. Nos. 98-0013, 98-0035, Sept. 14, 1998 (Ill.C.C.). </p>
<p> • Retailer Certification. Draft rules issued by staff set separate requirements, depending on whether an ARES serves nonresidential load of one megawatt or more, versus residential and small commercial load less than one MW. Rules set tougher requirements for residential service, with special tests barring discrimination on account of geography, gender or race. An ARES that generates, transmits or distributes power must meet technical and managerial qualifications. Sept. 18, 1998 (Ill.C.C.). </p>
<p> • Generation Divestiture. Draft rules don't force transmission and distribution utilities to divest generation, but bar utility employees working in generation or in a "bundled retail power merchant function" from gaining physical access to a utility delivery services system control center (or associated communications and computer systems) or receiving communications or information from such facilities to a degree greater than allowed for an ARES, except in emergencies. Nos. 98-0147, 98-0148, Aug. 28, 1988 (Ill.C.C.). </p>
<p> MULTI-STATE MERGERS. The Wisconsin Public Service Commission has ruled it has no jurisdiction to review two pending electric utility mergers because Wisconsin companies would acquire utilities operating outside the state. </p>
<p> The first deal involved Wisconsin Energy Corp., which won approval from the FERC in April for its merger with ESELCO, the parent company of Edison Sault Electric Co., a Michigan utility. The second concerned WPS Resources Corp., parent of Wisconsin Public Service, which would acquire UPEN, parent company of Upper Peninsula Power Co., another Michigan utility (the FERC ok'd the merger in May). No. 3270-DR-102, Sept. 2, 1998 (Wisc.P.S.C.). </p>
<p> UTILITY MARKETING AFFILIATES. The California Public Utilities Commission has modified rules adopted last year on relationships between energy utilities and their marketing affiliates, permitting temporary assignments of utility marketing employees to an affiliate not engaged in marketing activities in California, such as those operating outside the state or the U.S., along with other changes. </p>
<p> First, affiliates need not pay a minimum 15-percent fee when employees transfer from the utility to the affiliate if the utility would have eliminated the position anyway because of restructuring. Second, utilities may now offer new retail products and services on a nontariffed basis if they do not increase ratepayer risk or divert management control (such as by funding new products with new capital investment or assumption of business risk by utility stockholders). Third, the PUC will now allow new nontariffed products offered to one percent or more of the utility's customer base, provided the utility issues an advice letter addressing possible market impacts. Decision 98-08-035, R. 97-04-011, I. 97-04-012, 97, Aug. 6, 1998 (Cal.P.U.C.). </p>
<p> N.Y. ELECTRIC REFORM. The New York Public Service Commission has issued rulings on generation divestiture, net metering for self-generation, transaction fees charged by utilities to energy retailers, and how to use the proceeds from system benefits charges: </p>
<p> • Generation Divestiture. Sets rebuttable presumption that ownership of generation by affiliate of transmission and distribution utility creates unacceptable vertical market power. Proof of substantial ratepayer benefits, plus mitigation measures, can overcome presumption. Case 96- E-0900 et al., July 17, 1998 (N.Y.P.S.C.). </p>
<p> • Net Metering. Allows competitive energy retailers to offer net metering to customers using photovoltaic systems for self-generation. Case 97-E-1951 et al., July 28, 1998 (N.Y.P.S.C.). </p>
<p> • Transaction Fees. PSC strikes down charges assessed by New York State Electric and Gas Corp. to energy retailers for services such as meter reading, billing changes, load balancing and settlements (over $170 per month), as discouraging entry by competitors. Case 96-E-0891, July 7, 1998 (N.Y.P.S.C.). </p>
<p> • Public Benefits. Approves six-year plan for New York State Research and Development Authority to administer $243.3 million in systems benefits charges for public purposes (other than stranded-cost recovery or transmission and distribution). Plan includes $143 million for energy efficiency, $22.10 million for R&amp;D, and $9.40 million for low-income assistance. Reserves $59.8 million for use by utilities to fund their own programs. Case 94-E- 0952, July 2, 1998 (N.Y.P.S.C.). </p>
<p> GAS PROCUREMENT COSTS. The California Public Utilities Commission has authorized San Diego Gas and Electric Co. to start a new performance-based ratemaking plan for natural gas procurement. Any gas cost savings (measured against a market benchmark) will be shared equally between ratepayers and shareholders with ratepayers paying only 75 percent of the costs exceeding the benchmark. Decision 98-08-038, A. 97-09-049, Aug. 6, 1998 (Cal.P.U.C.). </p>
<p> LEGAL COSTS. The New Hampshire Public Utilities Commission has barred New Hampshire Electric Co-op. from upping its power cost adjustment rate to include legal costs incurred in a dispute over its obligation to purchase power from the Maine Yankee nuclear plant. Order No. 22,991, DR 98-093, Aug. 3, 1998 (N.H.P.U.C.). </p>
<p> ELECTRIC COST REPORTING. Finding no reason to collect detailed information for its own sake, the Idaho Public Utilities Commission has closed its electric unbundling investigation and will no longer require investor-owned utilities and co-ops to submit separate cost analyses for generation, transmission, distribution, metering, meter reading, billing and other customer services, plus reports for public purpose programs such as demand-side management, fish mitigation, alternative energy, and low-income assistance. Instead, it will require a single annual report and then decide whether to ask for more detail. Order No. 27678, Case No. UPL-E-98-1 (Utah P&amp;L Co.), Order No. 27679, Case No. WWP-E-98-1 (Wash. Water Pwr.), Order No. 27676, Case No. IPC-E-98-2 (Idaho Pwr.) , Aug. 24, 1998 (Idaho P.U.C.). </p>
<p> Transmission and ISOs </p>
<p> SYSTEM ENHANCEMENTS. On September 1 the Wisconsin Public Service Commission issued a report to the state legislature on the state's electric transmission system, identifying preferred options for system enhancements to mitigate constraints and to provide a simultaneous power transfer capability into Wisconsin of 3,000 megawatts - an approximate doubling of the state's current transfer capability - saying the increase was needed to achieve the reliability standard historically used in Wisconsin, a loss-of-load probability of no more than one day in 10 years. </p>
<p> The report was required by a 1997 law (Act 204) instructing the PSC to identify "any constraint on an intrastate or interstate electric transmission system that adversely affects the reliability of transmission service" provided to Wisconsin electric customers. The PSC warned, however, that any environmental and social issues and impacts associated with the identified system enhancements were likely to be significant. Download at PSC internet site at <a href="http://www.psc.state.wi.us">http://www.psc.state.wi.us</a>. </p>
<p> MAPP REGION. Members of the Mid-Continent Area Power Pool were to return their ballots on Nov. 4 in a vote on whether to create an independent system operator - a nonprofit corporation separate from MAPP to administer the a regional transmission tariff and operate a security center to oversee the grid. The measure would make ISO membership mandatory, but let MAPP members choose whether to transfer control of transmission facilities to the ISO. </p>
<p> EAST-WEST TIES. New Century Energies is planning to build a $110-million, 300- mile, 345-kv transmission line to connect Public Service Co. of Colorado and Southwestern Public Service Co. for the first time and allowing for asynchronous power flows between the Eastern and Western interconnections. Out of several alternatives, it chose a route north from Amarillo, then through the Oklahoma Panhandle to Kansas, then west to a substation near Lamar, Colorado, noting it was technically feasible, offered customer benefits, and satisfied reliability guidelines of the Western States Coordinating Council and the Southwest Power Pool. </p>
<p> Business Wire </p>
<p> THE U.S. Department of Energy chose Johnson Controls Inc., as one of seven energy service companies to help federal agencies in twenty states with a $1.5-billion upgrade of government facilities. The action allows federal agencies to negotiate services through Super Energy Savings Performance Contracts (ESPCs) with designated energy service companies. </p>
<p> DTE Coal Services Inc., a subsidiary of DTE Energy, recently acquired Fieldston Transportation Services LLC (FTS) from the Fieldston Co. and Focus Transportation LLC. FTS was renamed as DTE Transportation Services Inc. </p>
<p> Carolina Power &amp; Light has agreed to distribute to its commercial and industrial customers American Superconductor Corp.'s line of industrial power quality solutions on superconducting magnetic energy storage technology. American Superconductor will provide sales and customer service training and technical support for CP&amp;L personnel. </p>
<p> Central Maine Power Co. has selected Intergraph Corp. to provide AM/FM/GIS software and services under the product name ActiveFRAMME. Central Maine Power faces the startup of the retail electric competition in Maine on March 1, 2000. </p>
<p> Schlumberger Resource Management Services won a $12.2-million contract from South Australian Water Corp. to upgrade water metering throughout the state of South Australia. They will install a total of 440,000 new meters over six years beginning in October. The new meters will give the company an advanced metering infrastructure to precisely monitor and manage its distribution network. </p>
<p> PP&amp;L Resources Inc. acquired Penn Fuel Gas Inc. Penn Fuel Gas distributes and stores natural gas and sells propane. According to the merger agreement, Penn Fuel Gas shareholders will receive 6.968 common shares of PP&amp;L Resources for each common share of Penn Fuel Gas that they own. PP&amp;L Resources issued about $133 million of common stock to close the merger. </p>
<p> CILICORP Inc. completed the sale of the common equity of its fiber optic-based telecommunications subsidiary, QST Communications Inc. to McLeodUSA Telecommunications Services Inc. for $20 million in cash and stock options valued at $5.5 million. CILICORP Inc. will recognize a third-quarter after-tax gain of approximately $7.8 million or $.57 per share on the transaction. </p>
<p> Madison Gas &amp; Electric Co. and Wisconsin Public Service Corp. agreed to build an 83-megawatt gas-fired power plant on a site owned by WPS. Construction would begin in June 1999. </p>
<p> Washington Water Power Co. announced on Aug. 17 that it would slash its common stock dividend by 61 percent, from $1.24 to 48 cents (yield equaling 2.3 percent), effective with the dividend paid Dec. 15, 1998, to use the capital to fund growth. In a separate move, the board of directors approved Avista Corp. as the company's new name effective Jan. 1, 1999. </p>
<p> Congress </p>
<p> NUCLEAR WASTE DISPOSAL. The U.S. Senate on September 2 by a 78-15 vote approved the Texas-Maine-Vermont Radioactive Waste Compact Bill (H.R. 629) allowing those states to form the nation's tenth low-level radioactive waste disposal compact. It would lead to the construction of a nuclear waste disposal facility in Texas, allowing Maine and Vermont to send their nuclear waste there. </p>
<p> H.R. 629 was passed by the U.S. House of Representatives on July 30. President Clinton expected to sign the bill into law. Passage was lauded by the Nuclear Energy Institute (NEI), the nuclear electric industry's trade association, but opposition remained, as opponents from Texas held a press conference after the Senate vote, pointing out that a small, Hispanic town, Sierra Blanca, was the likely candidate for the disposal site. "If this isn't a classic case of environmental racism, I don't know what is," declared Bill Addington, a Sierra Blanca grocer who had gone on a hunger strike to protest the compact and the dump. </p>
<p> Generating Plants </p>
<p> MERCHANT PLANT CERTIFICATION. In a 3-2 decision in a case of first impression, the California Energy Commission has ruled that because plant output will be sold to the California Power Exchange, the 1048-megawatt, gas-fired, combined-cycle La Paloma Generating Project under development by U.S. Generating Co. qualifies for an exemption not to file a Notice of Intent to seek siting certification with the commission - an exemption otherwise available only for gas-fired plants which "are the result of competitive solicitations or negotiations." </p>
<p> According to the commission, the PX should be viewed "as a continuing series of solicitations or negotiations" conducted in real time: "It would be unrealistic to require executed contracts or agreements in the context of the presently developing market created by AB 1890, since a power producer will no longer necessarily sell to a discrete consumer or utility." </p>
<p> Dissenting commissioner Michal C. Moore argued that the NOI process should still serve a valid purpose, since it requires advance submission of alternative sites: "Merchant plants would benefit from the NOI process and its ability to establish the eligibility of sites for future development of power plants and related facilities." Docket No. 98-SIT-1, Aug. 12, 1998 (Cal.EnergyComm'n). </p>
<p> NUCLEAR OPERATIONS. Four Midwest utilities - Wisconsin Energy Corp, WPS Resources Corp., Alliant Corp., and Northern States Power Co. - have joined to combine planning and supply purchases for seven nuclear reactors totaling 3,650-MW at five sites in Wisconsin and Iowa. The utilities expect no layoffs, and say the move does not necessarily indicate an eventual merger of nuclear operations into one company. </p>
<p> NUCLEAR WASTE DISPOSAL. In a letter written to DOE Secretary Bill Richardson, 68 state utility regulators from 24 states have called for deferral of $6.5 billion in payments made by nuclear-owning utilities into the Nuclear Waste Fund until the Department of Energy provides disposal services. Specifically, the regulators said that DOE should limit annual payments to uses appropriated by Congress. Payment of the unappropriated portion of the fee - 84 cents on the dollar - would be deferred until DOE fulfills its obligation to remove nuclear waste from power plants. Earnings on accumulated deferred payments exceeding the U.S. Treasury rate would be retained to benefit electric consumers at the direction of individual states. </p>
<p> "By keeping these payments out of the U.S. Treasury, we stop Congress from spending the unappropriated portion on other things," said Minnesota commissioner Kris Sanda. "This would preserve the equivalent of $90 million of waste disposal funding for each of the 73 power plants from which nuclear waste must be removed." </p>
<p> Power Markets </p>
<p> MIDWEST SPIKES, TAKE ONE. Testifying on Sept. 24 before the Senate Committee on Energy and Natural Resources, and seeing no reason for alarm or a drastic shift in policy, Federal Energy Regulatory Commission chairman James Hoecker delivered a staff report on the power price spikes seen in the Midwest last June, attributing much of the cause to simple inexperience. Said Hoecker: "The team did not find evidence that firm service was compromised anywhere in the Midwest during the period of pricing abnormalities." Even so, he warned that Midwest summer peak demand had grown substantially and that "additions of new generating capacity have not kept pace." </p>
<p> MIDWEST SPIKES, TAKE TWO. The California Power Exchange Corp. has released a white paper, Defaults and Counterparty Risk in Electricity Wholesale Markets, prepared with Arni Petersson of Economic Insight, Inc., arguing that California was largely spared during last summer's Midwest price spikes because the PX minimizes counterparty risk inherent in bilateral trading. For copies contact Edward Freudenburg, at (626)537-3155, <a href="mailto:ecfreudenburg@calpx.com">ecfreudenburg@calpx.com</a>, or download at the PX internet site at <a href="http://www.calpx.com">http://www.calpx.com</a> ("About the PX"). </p>
<p> News Digest is compiled by Lori A. Burkhart and Phillip S. Cross contributing legal editors, and by Beth Lewis, editorial assistant. </p>
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Sun, 01 Nov 1998 05:00:00 +0000puradmin9903 at http://www.fortnightly.comNews Digesthttp://www.fortnightly.com/fortnightly/1998/07-0/news-digest
<div class="field field-name-field-import-byline field-type-text-long field-label-inline clearfix"><div class="field-label">Byline:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Lori A. Burkhart, Phillip S. Cross and Beth Lewis</p>
</div></div></div><div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">Fortnightly Magazine - July 15 1998</div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p> Power Pools &amp; Reliability </p>
<p> SUMMER IN WISCONSIN. Responding to concerns about the electric shortages of the summer of 1997 and fears that they could happen again, Wisconsin PSC Commissioner Joseph P. Mettner has indicated that the state's energy supply outlook for the summer of 1998 appears much better in eastern Wisconsin than it did one year ago. </p>
<p> Mettner noted that Wisconsin's electric supply system is operating with expected reserve margins of 19.2 percent. But he cautioned that electric power flows do not respect borders. </p>
<p> "Outages of 7,000-MW of nuclear units to the south of Wisconsin can cause severe strain on the transmission system as companies use the system to import replacement power," Mettner said. Eastern Wisconsin again could experience reliability problems due to factors beyond the control of the PSC, such as the substantial nuclear outages throughout Illinois, Michigan and Ontario. Also, extended periods of hot weather or unexpected plant shutdowns could lead to power shortages. (For updates, see <a href="http://badger.state.wi.us/agencies/psc/writings/papers/energy/risklvl.htm">http://badger.state.wi.us/agencies/psc/writings/papers/energy/risklvl.htm</a>.) </p>
<p> Meanwhile, one of the 10 reliability councils that make up the North American Electric Reliability Council, Mid-America Interconnected Network Inc., is discussed in a new report, 1998 NERC Summer Assessment for MAIN, showing that while Wisconsin may have more than adequate energy supplies, that neighboring states to the south may not. On a regional basis, utility members of MAIN are operating at an average capacity margin of nine to 12 percent, depending on availability of key Illinois nuclear units. (See, <a href="http://www.maininc.org/files.htm">www.maininc.org/files.htm</a> or <a href="http://www.nerc.com/~filez/special.html">www.nerc.com/~filez/special.html</a>.) </p>
<p> Business Wire </p>
<p> Light Rio Servicos, a subsidiary of Electricité de France, acquired Brazil's largest electric utility, Electropaulo Metropolitana. Light was awarded the bid at a price of $1.75 billion, representing 28.5 percent of capital stock and 75 percent of voting rights. </p>
<p> Energy Interactive Inc. was awarded a contract with KN Energy Inc. to deliver online customer energy information services through KN Energy's web site. </p>
<p> Energy Pacific, the joint venture of Pacific Enterprise and Enova Corp., announced it is changing its name to Sempra Energy Solutions. </p>
<p> Consolidated Natural Gas Co. plans to concentrate its unregulated energy marketing activities on retail customers and discontinue wholesale marketing and trading of natural gas and electricity. The cost of exiting the unregulated wholesale energy marketing operations will result in a pretax charge against first-quarter earnings from $55 million to $75 million. </p>
<p> Northern States Power Co. announced it has acquired the exclusive ownership rights to the Reddy Kilowatt symbol -- the red, lightning-bolt figure -- which was widely used by utilities in the 1940s, '50s and '60s. </p>
<p> Central Louisiana Electric Company Inc. is changing its name to Cleco Corp. The name change makes official a name the company has used for years. The company also is changing its logo. </p>
<p> Fourteen solar electric business ventures have been selected to receive a total of $5 million in U.S. Department of Energy funding through the Utility PhotoVoltaic Group's TEAM-UP program. The total value of these solar initiatives is more than $29 million and will add almost 3 megawatts of solar voltaic electricity to power homes and businesses in 20 U.S. states and Puerto Rico. </p>
<p> Mergers &amp; Acquisitions </p>
<p> ELECTRIC CONSOLIDATION. Consolidated Edison Co. of New York Inc. says it will acquire Orange and Rockland Utilities Inc. for $58.50 per share, or $790 million. The figure represents a premium over the May 8 O&amp;R common stock closing price of $42.25. O&amp;R would become a wholly owned subsidiary of ConEd, creating a combined base of 3.3 million electric and 1.2 million natural gas customers. </p>
<p> ConEd anticipates merger savings of $50 million per year over 10 years from elimination of duplicate corporate and administrative programs, and increased efficiencies. The approved New York restructuring plans for both utilities will continue to be implemented. Those plans call for generating plant divestiture. The utilities plan to use resulting funds to finance the O&amp;R purchase. </p>
<p> In response to the announcement, Standard &amp; Poor's affirmed the credit ratings of ConEd, and placed the ratings of O&amp;R on CreditWatch with positive implications. S&amp;P believes that due to the disparate sizes of the utilities -- O&amp;R is less than one-tenth the size of ConEd -- that O&amp;R should benefit from the stronger credit profile of ConEd. </p>
<p> TELECOM SPINOFF. Moody's Investors Service placed all the debt ratings of Citizens Utilities Co. on review for possible downgrade because the company plans to separate its telecommunications operations from its utility businesses. </p>
<p> If approved by regulators, Citizens would create a new corporate entity for all its telecommunications businesses. This entity would consist of Citizens' basic landline and wireless operations, in addition to Electric Lightwave Inc., a competitive local exchange carrier, of which Citizens owns 83 percent. The company's electric and natural gas transmission facilities and water distribution and waste water treatment would remain the sole assets of Citizens. </p>
<p> PUCs </p>
<p> NEED FOR POWER. The Michigan Public Service Commission rejected a request by the Detroit Edison Co. to solicit bids for new capacity assuming that the utility will not need new capacity until 2004. It also approved a new experimental wheeling program to assist the company in meeting its capacity needs and directed it to produce a plan to meet a capacity need of at least 417 megawatts in 1998 as identified by PSC staff. </p>
<p> The PSC said the company's capacity forecasting methods were too hypothetical and that recent events had cast doubts on the reliability of its projections. It noted significant press coverage of the need by the utility to curtail interruptible customers with little or no notice to meet peak need during the prior summer. In a dissenting opinion, Commissioner John C. Shea said that the commission's ruling "smacks of the very intrusive, Soviet-style program of centrally planned procurement of electricity" previously rejected by the PSC. He said that the commission had never developed the expertise necessary to serve the needs of an ever-growing base of electric customers and noted that Detroit Edison still would be required to provide firm stand-by service for retail wheeling customers under the newly approved plan. Case No. U-10840, April 14, 1998 (Mi.P.S.C.). </p>
<p> GAS TRANSPORTATION RATES. The New York Public Service Commission directed Brooklyn Union Gas Co. to provide gas transportation service to a proposed 80-megawatt independent electric generation project with no steam host, under terms and conditions similar to service provided to a qualifying cogeneration facility in the same area. The generator, New York City Energy Group LP, had said it would compete against the QF and complained that Brooklyn Union had refused to negotiate an off-tariff rate. </p>
<p> The PSC noted that the two generators would share the same gas transmission and distribution facilities, and ruled that their overall rate levels for fuel should be comparable, though rates could deviate to reflect differences in annual gas consumption at the two plants. Case No. 97-G- 0388, Apr. 14, 1998 (N.Y.P.S.C). </p>
<p> DISCOUNT CONTRACTS. The Virginia State Corporation Commission adopted guidelines to ensure that special rate incentives or discounts do not result in higher rates for other customers. To enforce that goal, it will start by examining whether revenues will exceed variable costs, but may launch a broader level of review, including costs, expenses and return calculated by rate class. Case No. PUE970695, March 20, 1998 (Va.S.C.C.). </p>
<p> ELECTRIC WIRES SERVICES. The New York Public Service Commission issued a policy statement on the use of tariffs, standardized agreements and supplier manuals to govern access rights and terms and conditions in the relationship between competitive energy service providers and regulated electric transmission and distribution utilities. Case No. 94-E-0952, March 10, 1998 (N.Y.P.S.C.). </p>
<p> ECONOMIC DEVELOPMENT RATES. The New York Public Service Commission authorized Consolidated Edison Company of New York Inc. to adjust rates under its new retail access program. The PSC wants to ensure that customers currently receiving rate discounts and business incentive offerings receive the same level of discount whether they remain as full-service customers of the utility or switch to a competitive energy supplier. The PSC said that city and state economic development officials had questioned whether the utility's new tariffs promoted competitive neutrality between retail access and full-service programs. Case No. 96-E-0897, April 10, 1998 (N.Y.P.S.C.). </p>
<p> FIXED GAS RATES. The New York Public Service Commission has authorized the state's natural gas local distribution utilities to offer customers a fixed-price option for gas consumption, rather than the variable monthly gas cost adjustment currently employed by the utilities, thus formalizing temporary emergency authority granted during the 1997-98 heating season. Non-core customers are excluded from the program. Case No. 97-G-0600, March 6, 1998 (N.Y.P.S.C.). </p>
<p> TELCO ACCESS CHARGES. In approving a settlement, the Maine Public Utilities Commission allowed Bell Atlantic-Maine to boost basic local exchange telephone rates by $3.50 per line to offset revenue losses predicted by cutting access charges to long-distance carriers, even though a price cap plan in effect barred any local rate hike except under a rigid, inflation-based formula, and did not include lost access revenues as an "exogenous change" that might warrant a rate hike. The PUC described the settlement as a fair resolution. Docket No. 94-123, March 17, 1998 (Me.P.U.C.). </p>
<p> GAS ADJUSTMENT CLAUSES. The Michigan Public Service Commission authorized Wisconsin Public Service Corp. to use its gas cost adjustment clause to recover unplanned costs to sell gas temporarily to a prospective transportation-only customer pending completion of necessary transportation facilities. It made the ruling even though using the GCA would impose costs on the broader class of bundled sales and transportation customers. Case No. U-11062-R, April 14, 1998 (Mich.P.S.C.). </p>
<p> TELCO ACCESS CHARGES. The Utah Public Service Commission set the price of an unbundled local network at its estimated cost of $20. It identified the cost of the "loop" portion of the telecommunications network connecting the end-user to the central office using incremental cost studies as a starting points and embedded cost evidence as "a cross-check" to a cost-modeling exercise premised on a hypothetical network model. It deferred action on whether to adopt a specific variation of the total element long-run incremental cost model and various related values of input assumptions. Docket No. 94-999-01, Phase II, April 8, 1998 (Utah P.S.C.). </p>
<p> PRICE-CAP PLAN. Under a newly approved price-cap plan for alternative regulation, the Ohio Public Utilities Commission excused Cincinnati Bell Telephone Co. from any duty to report earnings monitoring data to the PUC during the 3 and one-half year life of the plan. However, the PUC will still prescribe depreciation rates for the carrier. The plan affords significant pricing flexibility for most services except residential basic exchange service, subject to price floors based on a new long-run incremental cost study, but rate packages must contain a mark-up of at least 13 percent to cover common costs. Case No. 96-899-TP-ALT, April 9, 1998 (Ohio P.U.C.). </p>
<p> TELCO MERGERS. Regulators in Minnesota, Vermont, and Virginia approved the merger of WorldCom Inc. and MCI Telecommunications Corp., two of the nation's largest interexchange telecommunications carriers. In all three states, proponents of the merger had argued that the combination of the two companies would accelerate competition, especially in local markets, by creating an enterprise with the capital marketing abilities and network to compete against incumbent carriers. </p>
<p> Each PUC rejected claims that the combination of the two companies would reduce competition in local markets. Minnesota said GTE Corp., a competitor, would have stood to gain from stopping the merger. Docket No. P-443,3012/ PA-97- 1532, Apr. 9, 1998 (Minn.P.U.C.). Vermont saw "no evidence to suggest either company will become dominant in Vermont as a result of the merger." Docket No. 6037, Apr. 2, 1998 (Vt.P.S.B.). The Virginia commission rejected claims that the merger would diminish job growth in the state or harm the intrastate Internet market "by creating an entity with more than 63 percent control of the Internet backbone." Case No. PUA970052, Apr. 17, 1998 (Va.S.C.C.). </p>
<p> RETAIL ELECTRIC CHOICE. Consumers Energy submitted a draft plan to the staff of the Michigan PSC staff to allow its electric customers to participate in a bidding process to choose a power supplier. The plan conforms to a January 1998 PSC order calling for a phase-in of retail open access, leading to full customer choice by Jan. 1, 2002. Under the proposed schedule, Consumers Energy will open 300 megawatts of retail electricity for bidding this year, and another 150 MW each year from 1999 to 2001. </p>
<p> Generating Plants </p>
<p> BOSTON EDISON. Boston Edison Co. and Sithe Energies announced on May 15 that they had completed the nation's first divestiture of a utility's entire portfolio of fossil-fueled generating assets as a deregulation strategy. The sale took place expeditiously, as Sithe -- reportedly the third-largest independent power producer in the U.S. -- was named the winning bidder in December 1997, agreeing to pay $657 million for 12 generating units with 2,000 megawatts of capacity. </p>
<p> Sithe will pay $536 million for the generation assets and another $121 million for a six-month transitional power sales contract. The book value of the plants and sites is $450 million. Meanwhile Sithe has begun engineering feasibility studies at certain sites where it plans to invest $1 billion over the next three years to construct natural gas plants with 2,800 MW of additional capacity. </p>
<p> Massachusetts implemented deregulation on March 1, becoming the first state to allow electric choice for all customers, rather than phasing-in competition. </p>
<p> UNITED ILLUMINATING. The United Illuminating Co. announced on May 20 that it will begin to divest itself of its three fossil-fueled electric generation plants and its purchased power agreements to comply with Connecticut's restructuring law, which introduces competition by 2000. </p>
<p> The law requires Connecticut's utilities to submit a divestiture plan by Oct. 1, but allows utilities to bid on their own plants. However, UI does not plan to bid on its assets, and instead will concentrate on electric delivery and other nonregulated opportunities. Assets for sale are: the 667-MW Bridgeport Harbor Station; the 466-MW New Haven Harbor Station; the 75-MW English Station; a 5.45-percent share (66 MW) of Hydro Quebec; and 63 MW in purchased power contracts. UI estimated total book value of its plants of $220 million by the time the sale closes. Excluded from the package are UI's 17.5 percent (203-MW) share in the Seabrook nuclear plant, and its 3.8 percent or 41-MW share in the Millstone 3 nuclear plant. </p>
<p> State Legislatures </p>
<p> NEW YORK. New York Assembly Speaker Sheldon Silver on May 20 introduced an electric restructuring package comprised of three proposed bills, which if enacted would reduce rates by an immediate 10 percent for all customers, with an ultimate goal of a 25 percent. </p>
<p> Silver, who has been at odds with the PSC over its restructuring of electric markets on a utility-by-utility basis, said, "The PSC has repeatedly sold out ratepayers." Silver believes that other states have been able to dramatically reduce rates through restructuring, while the gap between New York and those states has grown. He pointed out that the average rate charged by New York's IOUs was 4 percent greater than the U.S. average in 1996. Also, New York ranks 47th of the 50 states in job growth. Neither reductions in gross receipts taxes on utilities enacted last year by the legislature, nor the modest rate cuts negotiated with utilities by the PSC, has been sufficient to reverse that trend, said Silver. </p>
<p> Bills included in the package are: </p>
<p> • Competition Plus (Assembly Bill 7942-D) -- requires a 10-percent electric rate cut in September, with more cuts two years later totalling 25 percent. Also, all customers would have supplier choice by 2000; </p>
<p> • PSC Elections (A.8245) -- A constitutional amendment calling for elections of PSC commissioners would be placed on the ballot for voter approval; </p>
<p> • Workforce Transition and System Reliability (A.8578) -- Standards would be set for worker training and for job transition and retention for any utilities undergoing certain types of restructuring; </p>
<p> • Energy 2000 (A.7941-C) -- To restructure the Power Authority of the State of New York and operate a fund to support energy efficiency and other projects; and </p>
<p> • Nuclear Restrictions (A.10214) -- To forbid PASNY from acquiring nuclear power facilities or related debt. </p>
<p> FERC </p>
<p> ELECTRIC TRANSMISSION PRICING. In a novel case, the FERC has allowed Commonwealth Edison Co. to implement an experimental, one-year tariff for nonfirm electric transmission service that will feature redispatch service to alleviate curtailments or interruptions -- both for nonfirm point-to-point service and for network customers using non-designated resources. </p>
<p> When ComEd uses its own resources to offer redispatch, it will price the service at the higher of (a) its embedded-cost transmission rate, or (b) its estimated incremental energy cost (opportunity cost), as represented by a 10-percent adder capped at 10 mills per kilowatt-hour. Thus, the case marks the first time the FERC has approved opportunity-cost transmission pricing based on estimated costs, rather than on an actual cost true-up. When redispatching neighboring systems, ComEd would receive payments for transmission only and would pass on to third parties the additional costs for generation incurred in making such arrangements. </p>
<p> As the FERC explained, its pro forma open-access transmission tariff, defined in Order 888, does not obligate any transmission provider to offer redispatch service or opportunity-cost pricing. Nevertheless, the commission had indicated that it would encourage pricing flexibility. It said it approved the ComEd tariff on an experimental basis because it would offer price certainty to transmission customers. Also, after-the-fact reporting of actual redispatch costs will help the commission to determine how well prices track actual costs. Docket No. ER98-2279-000, 83 FERC ¶61,145, May 13, 1998. </p>
<p> ELECTRONIC FILINGS. The FERC has issued a notice of proposed rulemaking asking for comments on how it should create a more efficient electronic information system to process and distribute the hundreds of filings it presently receives on a daily basis. The Commission believes that a "paperless" environment could save money. After it reviews comments, FERC will schedule a technical conference and establish working groups to study its goal of a paper-free regime. Docket No. PL98-1-000, May 13, 1998 (F.E.R.C.), 63 Fed.Reg. 27529 (May 19,1998). </p>
<p> QF STANDARDS. The FERC has clarified that when a qualifying cogeneration facility fails to meet the Commission's technical operating standards for certain periods, prompting a utility to suspend its power purchases from the QF facility during the period of temporary noncompliance, any contract refunds between the QF owner and the utility should be based on the utility's alternative hourly economy energy costs. Thus, for any hour in which the QF was available but not dispatched, the utility must compensate the QF owner for value provided, if the cost of the QF energy would have cheaper than alternative economy energy. The QF would repay the utility if economy energy was cheaper. </p>
<p> The case involved LG&amp;E-Westmoreland Southamptons's 62.6-megawatt, topping-cycle cogeneration plant, which sold wholesale power to Virginia Electric Power Co. but had failed to meet FERC operating standards for QFs during 1991 and 1992. Docket Nos. EL94-45- 002 et al., 83 FERC ¶61,182, May 18, 1998. </p>
<p> Congress </p>
<p> NUCLEAR REGULATION. The U.S. House of Representatives Subcommittee on Energy and Power on May 20 held a hearing to examine whether an independent federal body should regulate nuclear facilities now under the auspices of the Department of Energy. DOE has been considering a transition that involves the Nuclear Regulatory Commission as the body that oversees nearly 3,500 nuclear facilities now managed by DOE. </p>
<p> DOE presently is involved in a two-year pilot program at six to 10 DOE sites to determine the desirability of NRC regulatory oversight that would support a decision on whether to seek legislation authorizing NRC legislation at DOE nuclear facilities. </p>
<p> The hearing came two days after Energy Secretary Pena had offered to allow electric utilities with nuclear power plants to defer some payments into the Nuclear Waste Fund. Later, on June 2, Senate Majority Leader Trent Lott (R-Miss.) failed to win the necessary two-thirds vote to limit debate on H.R. 1270, a bill that calls for temporary storage of more than 28,000 tons of radioactive waste now stored at 73 nuclear plants in 34 states. (See, "Waste Bill Dies, Same Fate Seems Certain for DOE Proposal," by Joseph F. Schuler, July 1, 1998, p. 20.) </p>
<p> ENVIRONMENTAL EXTERNALITIES. The Minnesota Court of Appeals affirmed a 1977 order by the state public utilities commission that set avoided-cost values for various air emissions (including carbon dioxide) under a 1993 state law requiring utilities to evaluate environmental externality costs in weighing options for new power plant construction, despite concerns about the reliability of the cost data. The court discouraged the state from "environmentally conscious" planning strategies. </p>
<p> The PUC had set cost values for sulfur dioxide, nitrogen oxide, volatile organic compounds, particulates, carbon monoxide and carbon dioxide, differentiated by geography, with separate values for urban, rural and metropolitan fringe areas. The value for CO2, for example, ranged from $0.30 to $3.10 per ton. </p>
<p> The appeal, filed by the Lignite Energy Council, Western Fuels Association, the State of North Dakota, and various Minnesota electric utilities, argued that "no substantial evidence exists that CO2 causes or contributes to serious environmental damage." In the Matter of Quantification of Environmental Costs, No. CX-97-1391, 1998 WL 248211, May 19, 1998 (Minn.App.). </p>
<p> QF POWER COSTS. A New Jersey Appeals Court has rejected attempts by a group of electric consumers to stop the pass-through of above-market purchased power costs paid by Atlantic City Electric Co. to qualifying cogeneration facilities. It held the Public Utility Regulatory Policies Act preempts state regulators from adjusting purchased power rates retroactively or denying a pass-through of costs under a utility contract with a QF under simply because rates or costs under the contract has risen above market rates. Re Atlantic City Electric Co., 708 A.2d 775, May 1, 1998 (N.J. Super. Ct. App. Div.). </p>
<p> STRANDED COSTS. The Pennsylvania Commonwealth Court rejected claims that sections of the state's electric restructuring law allowing recovery of stranded costs are unconstitutional, thus denying an appeal by Indianapolis Power and Light Co., which had challenged a "qualified rate order" issued by the Pennsylvania Public Utility Commission in 1997, allowing PECO Energy to recover a portion of its stranded costs. </p>
<p> IPALCO, as an owner of out-of-state generation, had argued that stranded cost recovery could help subsidize PECO in interstate power markets, thus violating the Commerce Clause. The court ruled, however, that the law actually promoted interstate commerce by opening the state's electric markets and inviting out-of-state suppliers to compete for retail sales. IPALCO v. Pa. PUC, No. 1597 C.D. 1997, 1998 WL 223225, May 7, 1998 (Pa.Comm.Ct.). </p>
<p> Studies &amp; Reports </p>
<p> NUCLEAR RISK/GAS DEMAND. The INGAA Foundation claims that the natural gas industry should prepare to meet the need for new power generation from the anticipated shutdown of nuclear plants in Canada, New England, and the Midwest. </p>
<p> The May 13 report, produced by the Washington International Energy Group, finds a potential demand for up to 550 billion cubic feet per year of natural gas as a replacement fuel for nuclear generation, requiring further expansion of pipeline capacity in the Midwest and Northeast. (For copies of Need for Natural Gas Increases With More Nuclear Plant Shutdowns, contact Linda Thomas at 202-216-5900.) </p>
<p> GAS TRANSPORTATION RATES. The Gas Research Institute released Pipeline Markets in Transition: Cost Impacts of FERC Order 636, which finds that natural gas transportation charges are likely to continue declining for most pipeline customers. Contributing factors include the end of FERC Order 636 transition costs and take-or-pay liabilities, an increase in pipeline load factors, and use of incentive rates on portions of the transmission grid. The May 14 study also examines how pricing of interstate pipeline services could affect gas commodity prices. (GRI Document No. GRI-97/0374. For copies, contact Val Megginson at 703-526-7832.) </p>
<p> NUCLEAR POWER. The Nuclear Energy Institute (NEI) on May 19 unveiled its policy blueprint, "Nuclear Energy: 2000 and Beyond, A Strategic Direction for Nuclear Energy in the 21st Century," which promotes nuclear power to ensure fuel diversity and reduce harmful air emissions. (To obtain a copy contact Lawanne Stewart, NEI, tel. 202-739-8148.) </p>
<p> News Digest is compiled by Lori A. Burkhart and Phillip S. Cross, contributing legal editors, and by Beth Lewis, editorial assistant. </p>
<p></p>
<p><center>16</center>
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Wed, 15 Jul 1998 04:00:00 +0000puradmin9845 at http://www.fortnightly.comNews Analysishttp://www.fortnightly.com/fortnightly/1998/07/news-analysis
<div class="field field-name-field-import-byline field-type-text-long field-label-inline clearfix"><div class="field-label">Byline:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Joseph F. Schuler Jr.</p>
</div></div></div><div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">Fortnightly Magazine - July 1 1998</div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p> POLITICS WON OVER PURPOSE AS AN EARLY VOTE on a nuclear waste bill in the U.S. Senate was itself laid to waste, apparently victim of a contested Senate seat in the state where spent fuel would be stored. </p>
<p> The June 2 vote would have limited debate on H.R. 1270. By getting a vote count, the leanings of senators on the bill would have been tested. And the way would have been paved for Senate Majority Leader Trent Lott (R-Miss.) to schedule a second, more formal vote on the measure. </p>
<p> But nine Democrats who supported a similar bill last April 15 in a 65-34 count - with one not voting - changed their vote, causing the cloture to go down 56-39. This time around, five senators didn't vote; 60 yeas are needed to invoke the cloture to end a filibuster. </p>
<p> Politics began intervening the day before the Senate tally when Rep. John Ensign (R-Nev.) released a statement saying that House Speaker Newt Gingrich (R-Ga.) didn't intend to call up the legislation this year. Rep. Gingrich, just minutes before the Senate ballot, released a statement saying it was unlikely the bill would make it past the president's veto to become law. Because of the crowded floor calendar and opposition of some members, he said he didn't expect to schedule floor action this year. </p>
<p> Although Rep. Ensign and Sen. Harry Reid (D-Nev.) have been united in their fight against interim storage of nuclear waste in their state, one defining factor intervened when it came to the Senate vote on temporary nuclear waste storage: Rep. Ensign is running for Sen. Reid's seat in this year's election. Apparently the outcome of the bill boiled down to that senate race - neither Nevadan wanted to anger constituents and both wanted to lay claim to being the one who aborted the vote. Rep. Ensign got there first with Rep. Gingrich's help, but Sen. Reid may have the last laugh come Election Day. </p>
<p> "It came down to election-year politics," said Derek Jumper, spokesman for the Senate Committee on Energy and Natural Resources. Jumper notes that had the nine Democrats voted as they did last year, there would have been 67 votes for the bill because two Republicans joined proponents. A 67-vote count could have overridden a presidential veto. </p>
<p> The preliminary vote on putting a temporary nuclear waste dump near Nevada's YuccaMountain, proposed site of the permanent repository, also comes just weeks after the Department of Energy offered utilities with nuclear power plants the chance to defer payments into the Nuclear Waste Fund - if they promised not to sue the DOE for not taking spent fuel. </p>
<p> The deferred payments, the DOE reasoned, would allow utilities to invest the money and use the excess to offset costs of on-site storage. </p>
<p> Observers say the timing of DOE's proposal was odd. </p>
<p> Working Toward Compromise </p>
<p> The DOE's May 18 offer came just days before Sen. Lott filed his motion to get the floor vote on the bill calling for temporary storage of more than 28,000 tons of radioactive waste stored at 73 nuclear plants in 34 states. </p>
<p> Nuclear waste program funding is about $635 million a year, according to Steve Unglesbee, Nuclear Energy Institute spokesman. Congress typically appropriates $190 million annually to use for the program, with the rest put on the books to make the deficit look smaller. </p>
<p> "I have not seen any indication from anyone, anywhere in the country, state or utility, that had any level of satisfaction with what was put on the table," said Mike McCarthy, administrator of the Nuclear Waste Strategy Coalition. </p>
<p> "Not all utilities will take this, I would imagine," said Lake H. Barrett, acting director of the DOE's office of civilian radioactive waste management. "I would be surprised if all utilities take this proposal... Some may." </p>
<p> The offer comes after two federal appeals court decisions. The first, decided Nov. 14, 1997 by the United States Court of Appeals (Northern States Power Co., et al., No. 97-1064, consolidated with Nos. 97-1065, 97-1370 and 97-1398) required the DOE to work out its disagreements over payment of damages to 49 companies under their Nuclear Waste Policy Act contracts. The second, decided May 5 by the same court under the same docket, took "no opinion on the legality of the DOE's using utility or ratepayer-supplied monies to pay costs or damages." </p>
<p> DOE, believing the suits posed no roadblocks to its plans, went ahead. </p>
<p> "It certainly looks like their timing was calculated," said one observer from the regulatory community who asked not to be named. "All they have to do is persuade two or three senators that this settlement offer is something to think about and you don't have to do the legislation. And if you have any doubts about the legislation, you don't have to vote for it." </p>
<p> Barrett insisted that the DOE's timing was coincidental. </p>
<p> "It has taken a long time to develop this and get all the internal coordination within the administration," the DOE official said. "We knew the court process was going forward and we were trying to, as I said, acting in good faith to get a proposal out since we didn't get any proposals in from the other side, other than legislation. It just took us a long time to get it out. It's a coincidence that this got out this week." </p>
<p> Relinquishing Rights </p>
<p> Barrett says under the DOE plan, utilities would only pay their portion of the program funding that would be used. The balance could be invested until it was paid back, at the Treasury Bill interest rate, currently about 5 percent. It would be paid back when the DOE received the waste for permanent, underground storage at Yucca Mountain. </p>
<p> Assuming a 10-percent return and assuming all utilities took the offer, the combined utility earnings would be $2.8 billion. Assuming a rate of return of 14 percent, $5 billion could be earned, he said. These scenarios also assume the waste is received by 2010. </p>
<p> But what compelling reason would utilities have to give up their rights to sue for damages? </p>
<p> "There's a very broad range of utilities and each utility situation is unique," Barrett said. "If a utility does not have damages they can sustain in court through a long process, this might be a better situation for their ratepayers and stockholders. There are others who it might not work for. They each have to look at it in their own financial and legal situation." He said the proposed settlement creates a strong incentive for the DOE to meet its obligation. "If we did not perform and we did not take the fuel, all of that money never comes to the federal government," he said. "It's still held by the utilities." </p>
<p> The deferred payments due in 2010 total $6.4 billion. </p>
<p> "The government wants to perform, it's the government's responsibility," Barrett said. "We know that and we're trying our best to perform, but this would be added incentive from a financial point of view." </p>
<p> Lobbying for Legislation </p>
<p> "There's just a glaring omission of no date for pick up," said Unglesbee. "And there's no indication of how DOE intends to meet its obligation." </p>
<p> Legislation would address the root problems, he said. </p>
<p> The unnamed industry observer noted that municipally owned utilities are only allowed to invest in Treasury securities. So they would not be able to invest at higher interest rates. They'd have to pay back what they'd earned, so nothing would be gained. </p>
<p> For other utilities, commissions would scrutinize money collected for obligations and impose very strict requirements on how it could be invested. "You're not going to be able to use the riskier investments that would generate a higher rate of return," the observer notes. "The utility has to engage with the state commission on something like this. If the state says no, then the utility wouldn't be able to do it anyway." </p>
<p> The fact that the DOE recognizes the money collected shouldn't be going to other purposes is one of the sole benefits of the proposal, McCarthy said. But for utilities to give up their right to sue for damages, that would be unexplainable to stockholders. </p>
<p> Furthermore, he estimates life cycle costs of nuclear waste at $40 billion to $80 billion, which would mean DOE's offer would be mere cents on the dollar. </p>
<p> McCarthy said as many as eight states have started legal and administrative processes to escrow money on their own, withholding even from the federal government. </p>
<p> Barrett said the DOE set June 15 as the loose, "fairly mellow," deadline for utilities to accept its offer. By June 2, 41 companies had joined to reject the DOE's proposal, claiming that its monetary remedies were inadequate. In a letter to Secretary of Energy Federico Peña, Joe F. Colvin, Nuclear Energy Institute CEO, reiterated the industry's position: "Extending storage of used fuel at nuclear energy plant sites throughout the United States instead of moving the used fuel to central storage is not an acceptable solution." </p>
<p> Joseph F. Schuler Jr. is senior associate editor at Public Utilities Fortnightly. </p>
</p>
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<p><center>20</center>
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Wed, 01 Jul 1998 04:00:00 +0000puradmin9834 at http://www.fortnightly.comNews Digesthttp://www.fortnightly.com/fortnightly/1998/05/news-digest
<div class="field field-name-field-import-byline field-type-text-long field-label-inline clearfix"><div class="field-label">Byline:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Lori A. Burkhart, Phillip S. Cross, and Beth Lewis</p>
</div></div></div><div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">Fortnightly Magazine - May 1 1998</div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p> Courts </p>
<p> NITROGEN-OXIDE EMISSION LIMITS. Denying an appeal by electric utilities and industry groups against rules proposed by the U.S. Environmental Protection Agency for emission limits for nitrogen oxides at certain electric utility boilers, a federal appeals court has ruled that EPA properly interpreted the Clean Air Act. The act allows EPA to set NOx limits for certain electric utility boilers if it could show that more effective technology for low-NOx burners was available, the court said. It said the EPA acted reasonably in relying on linear regression models and a dollars-per-ton cost-benefit method in estimating emissions, mitigation and benefits. However, it vacated and remanded the EPA's decision to reclassify retrofitted cell burner boilers as wall-fired boilers. Appalachian Power Co. v. EPA, Nos. 96-1497, Feb. 13, 1998, 1998 wl 56312 (D.C.Cir.). </p>
<p> ANTITRUST ISSUES. A U.S. District Court has postponed a review of allegations that a small local exchange telephone carrier, Camden Telephone, had violated federal antitrust laws by failing to provide subscriber listings to a competitive directory publishing company, Direct Media Corp., at a reasonable price. (The publisher's other option would be to copy the LEC's white page directory.) The court ruled that the Telecommunications Act of 1996 requires LECs to provide directory listings at a reasonable price and that the Federal Communications Commission has primary jurisdiction to resolve the issue. Direct Media Corp. v. Camden Tel. &amp; Tel. Co., Inc., No. cv296-108, Dec. 2, 1997 (S.D.Georgia). </p>
<p> YELLOW PAGES REVENUE. The Washington Supreme Court upheld a decision by state regulators to impute Yellow Pages Revenues earned by a publishing affiliate US West Direct when setting base local telephone rates for US West Communications Inc., explaining that the affiliate derived substantial benefits from its relationship with the parent company. It also upheld other findings that had led to rate reductions for the carrier. (In 1996 state regulators had told the carrier to trim rates by $91.5 million, citing service quality problems.) U S West Communications, Inc. v. Wash. UTC, Dec. 24, 1997, 949 P.2d 1337 (Wash.). </p>
<p> WATER UTILITY METERS. Endorsing automated meter reading, the Rhode Island Supreme Court overturned a 1996 state PUC order that had rejected a wireless AMR installation by the city of Providence as too costly, but OK'd upgrades to older electronic meter interface units (also known as ARB), already in place for a third of the utility's 68,000 retail accounts. Said the court: "Given the benefits of AMR over ARB, a one-time $78 charge per account arguably would prove more cost-effective." Providence Water Supply Bd. v. R.I. PUC, No. 96-600-m.p., March 11, 1998, 1998 wl 122623 (R.I.). </p>
<p> Federal Agencies </p>
<p> COAL/UTILITY CROSS-OWNERSHIP. The Federal Trade Commission has requested </p>
<p> comments by April 27 on a proposed agreement with PacifiCorp to address charges that a planned acquisition would lead to increases in U.S. electricity prices. The acquisition in question, which was not yet final as of Feb. 18, would have PacifiCorp bidding $10.7 billion for The Energy Group, PLC, a U.K. company that owns Peabody Coal in the U.S., which in turn owns two mines (Kayenta and Black Mesa) that offer the sole source of coal for the Navaho and Mohave power plants, which compete against PacifiCorp generation. The FTC noted that such control could give a merged PacifiCorp/Peabody both "the incentive and the ability" to raise coal supply prices to competing generators. The proposed consent agreement calls for PacifiCorp to divest the two coal mines and to build a "firewall" forbidding Peabody from disclosing to PacifiCorp any nonpublic information about some of its coal-buying customers. File No. 971-0091, Feb. 18, 1998; 63 Fed.Reg. 9551 (Feb. 25, 1998). </p>
<p> NUCLEAR WASTE DISPOSAL. Forty-one nuclear-owning electric utilities have asked the U.S. Court of Appeals to order the U.S. Department of Energy to develop a program immediately to begin disposing of nuclear waste. The utilities asked the court to enforce its Nov. 14, 1997 order stating that DOE has an unconditional obligation to dispose of the utilities' spent nuclear fuel by Jan. 31, 1998. The utilities seek relief from further contributions into the Nuclear Waste Fund and ask the court to bar the federal government from terminating contracts for waste disposal. </p>
<p> Business Wire </p>
<p> THE U.S. DEPARTMENT OF ENERGY has awarded ERI Services, a subsidiary of Equitable Resources Inc., a contract valued at $150 million for energy savings performance contracting services. ERI Services will install energy-saving technologies and equipment in federal buildings with no up-front costs to the government. For a set number of years, ERI Services will receive a percentage of the energy savings from the installations. </p>
<p> Minnesota Power intends to file with the Minnesota Public Utilities Commission the organization of its new telecommunications subsidiary, MP Telecom. Initially MP Telecom will provide additional high-speed and large-capacity communications largely in wholesale markets. </p>
<p> CellNet Data Systems Inc. will provide informational metering data services to 71 Circuit City sites including retail stores and distribution and service centers. CellNet will provide service on a monthly per-meter basis and will deliver hourly intervals of electricity consumption data daily over CellNet's Web site, <a href="http://www.myEnergyInfo.com">www.myEnergyInfo.com</a>. </p>
<p> Dick Hahn, vice president of technology at Boston Edison, said electric ratepayers will benefit from its joint venture with Residential Communications Network, because it built a new fiberoptic network for its electric business at no additional cost to ratepayers (em a $3-million savings. Hahn was responding to an investigation by the Massachusetts Department of Telecommunications and Energy into whether the utility improperly subsidized a cable television and telecommunications venture through unregulated subsidiary The Boston Energy Technology Group. </p>
<p> Congress </p>
<p> ELECTRICITY CAUCUS ROLE. U.S. Rep. Tom Bliley (R-Va.), Commerce Committee chairman of the House of Representatives, on March 2 wrote to Rep. Bill Thomas (R-Calif.), chairman of the House Oversight Committee, seeking official acknowledgment of the Congressional Electricity Caucus as a congressional membership organization. The group was formed to bring competition to America's electric markets by a date certain. Bliley would serve as co-chair along with Reps. Joe Kennedy (D-Mass.) and Charles "Chip" Pickering Jr. (R-Mas). It plans to educate Congress on public policy questions raised by increasing competition among electric suppliers, but will not advocate any one legislative proposal over another. </p>
<p> Studies &amp; Reports </p>
<p> UK ELECTRIC INDUSTRY. Standard &amp; Poor's Ratings Service recently released U.K. Electrics: Another Year of Change, which predicts that in 1998 the U.K.'s electric sector will experience the same growth in activity seen in 1997 as power companies grapple with competitive and regulatory shifts affecting pricing and generation. Acquisitions of distribution companies dominated 1997, as all but one of the original 12 regional companies in England and Wales were acquired by the end of the first quarter. In 1998, S&amp;P foresees consolidation in the supply sector. </p>
<p> U.S. POWER DEMAND. Margins Under Fire: Wholesale Power Price Forecast for Western US Markets, 1997-2011, a report by Resource Strategies, finds that West Coast utilities have underestimated their future power needs, and will need about 25 more generating plants than currently planned. The study also said the Bonneville Power Administration and the Northwest Power Area, long the dominant supplier in the WSCC area, may already have lost their leadership status. </p>
<p> INCENTIVE REGULATION. The Committee on Energy Resources and the Environment, at the National Association of Regulatory Utility Commissioners, has released a report, Performance-Based Ratemaking in a Restructured Electric Industry. The report looks at existing PBR programs and reviews how state regulators have set up different forms of PBR for vertically integrated utilities. The report suggests ways to use PBR in a competitive electric industry. Also, the report provides insights for those wanting to retain a more traditional industry structure. Copies may be ordered from NARUC, P.O. Box 684, Washington, D.C., 20044. </p>
<p> POWER MARKET DATA. The Business Communications Company Inc. recently published a study, The Changing Electric and Gas Utility Business (No. re-087), which details sales and revenue data in power markets and predicts that by 2002, sales tracking systems will record sales and revenues by function, rather than by utility type. More information is available through BCC's Web page at <a href="http://www.buscom.com/editors">www.buscom.com/editors</a>. </p>
<p> FERC </p>
<p> GENERATION PLANT DIVESTITURE. The FERC approved the sale of electric generating facilities by two subsidiaries of the New England Electric System to USGen New England, finding no adverse effect on relevant markets. It approved market-based sales rates for the divestiture. The NEES subsidiaries, New England Power Co. and Narragansett Electric Co., are involved in restructuring for retail competition in Massachusetts and Rhode Island. </p>
<p> The sale includes almost all nonnuclear generating assets owned by NEES: (1) 4,000 MW of fossil-fired and hydroelectric generating capacity owned by NEPCO; (2) Narragansett's 10-percent interest in the Manchester Street generation station; and (3) Narragansett's 20-percent interest in the Ocean State IPP. Docket Nos. ec98-1-000, er98-6-000, Feb. 25, 1998, 82 FERC ¶ 61,179. </p>
<p> QF CERTIFICATION. In a case involving qualifying cogenera- </p>
<p> tion facilities, the FERC announced that it will not revoke QF status for any facility that sold power in excess of "net output" under a contract entered into on or before June 25, 1991 (em the date of the commission's Turners Falls decision (55 FERC ¶ 61,487), which first set the rule that QF sales exceeding net output will violate the QF ownership test for certification. </p>
<p> In Turners Falls, the FERC explained that if a QF acquires auxiliary power from a utility to meet its internal needs to allow it to sell more than net output (defined as QF plant capacity minus power to run the station), the FERC will treat the QF as having purchased and resold the auxiliary power from the utility, thus violating the condition that a QF must be engaged primarily in selling power from qualifying facilities. </p>
<p> Acknowledging ambiguities in its regulations (em the "simultaneous buy-sell" rule, at 18 CFR sec. 292.303(a)-(b), appeared to conflict with the Turners Falls rule (em the FERC agreed to exempt contracts signed earlier. But it reaffirmed that other sales exceeding net output (e.g., sales of "gross output") would violate QF certification rules. Docket Nos. el94-10-000, Feb. 25, 1998. </p>
<p> Generating Plants </p>
<p> NEW YORK CITY SALE. Consolidated Edison Co. of New York Inc. on March 3 announced divestiture plans for about two-thirds of its electric generating plants in New York City. The plan divides ConEd's 5,500 MW of electric plants into three bundles. Each bundle contains a major generating plant (em Ravenswood in Long Island City, Astoria in Astoria, and Arthur Kill on Staten Island (em and gas turbine generating facilities in Queens and Brooklyn. ConEd plans to sell two bundles (two-thirds of its total New York City electric capacity) at auction this summer. It hopes to obtain New York PSC approval by July 1, 1998, with the auction process beginning later that month, and winners announced in January 1999. At press time, ConEd had not yet decided which two bundles would be auctioned. </p>
<p> Cooperatives </p>
<p> G&amp;TS CONSIDER MERGER. Two Minnesota generation and transmission cooperatives are studying combining their staffs in anticipation of industry changes. Cooperative Power and United Power Association, the state's two largest G&amp;Ts, feed distribution systems serving 500,000 homes. The boards of the two organizations signed a letter of intent to form a new, as yet unnamed, operating company. Both organizations believe a single operating company "would provide economic benefits and strategic advantages which would be greater than what either organization could accomplish on its own," according to a statement. Both boards indicated their intent is to form an operating company by the end of the year. Both CP and UPA would remain legal entities under the proposal, but would contract with the new operating company for management services. A merger was considered, then deferred for further study because of differences in the tax structure between the two groups. UPA has 400 employees; CP has 360. The G&amp;Ts serve 29 member companies. </p>
<p> CONSUMER ATTITUDES. A survey commissioned by the National Rural Electric Cooperative Association and described by CEO Glenn English in a recent speech to association members claims that 80 percent of electricity customers served by investor-owned utilities would rather take service from a consumer-owned utility and, of that group, more than a third (39 percent) would be willing to pay a little extra each month for the privilege. The survey, proprietary to NRECA members, claims that 62 percent of IOU customers would prefer a utility that is locally owned and controlled. </p>
<p> State PUCs </p>
<p> ELECTRIC RATE CASES. Green Mountain Power Corp. said it </p>
<p> will appeal a 270-page rate decision issued by the Vermont Public Service Board granting only $5.48 million of a requested $22 million revenue increase. That award amounts to 3.6 percent on base rates, compared with the utility's original request of 16.7 percent. The board disallowed $5.48 million in power purchase costs under a contract with Hydro-Quebec, by which GMP and 13 other utilities buy power. Christopher L. Dutton, GMP president and CEO, said the ruling "may be devastating." Docket 5983, March 2, 1998 (Vt.P.S.B.) Download at <a href="http://www.state.vt.us/psb/5983gmp.htm">www.state.vt.us/psb/5983gmp.htm</a>. </p>
<p> Moody's Investors Service said it had "increased concerns" over the utility's ability to sustain its present debt rating level (Sr.Sec., Baa2) due to the "negative" rate order. </p>
<p> RATE BASE EXCLUSION. The Connecticut Department of Public Utility Control has ordered Connecticut Light and Power Co. to reduce rates by $141 million to reflect the removal from rate base of the company's Millstone Unit 1 nuclear power plant and other adjustments for imprudent expenses, advertising and amortization payments. The order cuts rates by $110.5 million, through a non-cash write down of deferred taxes and conservation and load management expenses, and offers a $30.5 million "line-item credit" on customer bills for the lost rate base investment. Docket No. 98-01-02, Feb. 25, 1998 (Conn.D.P.U.C.). </p>
<p> (Millstone Unit 1, down for an unscheduled outage, was ruled "not used or useful" late last year. See, Docket No. 97-05-12, Dec. 31, 1997. Units 2 and 3 were to return to service on April 1 and June 1.) </p>
<p> INDEPENDENT SYSTEM OPERATORS. The Wisconsin Public Ser- </p>
<p> vice Commission has denied a proposal by Wisconsin Power and Light Co. to implement its version of an independent system operator, filed by the company as a condition to its planned merger with two Iowa utilities to create Interstate Energy Corp. The PSC instead has directed the utility to file the ISO proposal crafted by Wisconsin Public Power Inc., which the FERC had approved previously. The PSC said that the ISO, as proposed by WPL, would leave too much control of the power lines in the hands of the companies that own the lines. According to the PSC, that could lead to higher electric prices and a less reliable system, which the PSC's ISO standards were designed to prevent. Case No. 6680-um-100, Feb. 24, 1998. </p>
<p> Mike Stuart, General Counsel for WPPI, reported at press time that WPL had declined to file the WPPI ISO plan with the PSC by March 12, as required, and instead had asked the PSC for reconsideration of its order, and had also asked the FERC for an extension of time to file its ISO plan. </p>
<p> NIAGARA MOHAWK RESTRUCTURING. The New York PSC approved a revised restructuring plan (PowerChoice) for Niagara Mohawk Power Corp. that will allow all customers to choose their energy supplier by 1999 and will save about $2 billion over the next five years. The ruling marks the last approval of a restructuring plan for an investor-owned utility in New York and will cut rates for (1) residential and small commercial and (2) industrial and large commercial customers by 3.2 percent and 25 percent, respectively, during the first three years of implementation. The company has agreed to absorb almost $2 billion in stranded costs on generation investment and purchased power contracts. The order also approved the utility's Master Restructuring Agreement, which will terminate, restructure or amend 29 purchased power contracts with 16 independent power producers. Case 94-e-0098, Feb. 24, 1997 (N.Y.P.S.C.). </p>
<p> WATER UTILITY RETURNS. The Connecticut Department of Public Utility Control ruled that ongoing sales of surplus watershed property by Birmingham Utilities Inc. would reduce perception of financial risk among investors despite the company's relatively small size. It authorized Birmingham Utilities Inc. to increase water rates by 4.1 percent and adopted a rate of return of 12.16 percent. It noted the company's decision to reduce its dividend by 20 percent during 1997 showed that its board of directors was optimistic about the company's financial outlook. Docket No. 97-07-14, Jan. 21, 1998 (Conn.D.P.U.C.). </p>
<p> PILOT PROGRAMS (em IOWA. The Iowa Utilities Board has set guidelines for MidAmerican Energy Co. to develop a two-year pilot program to extend energy choice to at least 3 percent of both residential and small commercial electric customers. The utility must design an unbundled rate tariff for each group based on current bundled rates and allocated costs and must provide backup service (em either directly or through suppliers. MidAmerican will retain control of meters and may recover start-up and administrative costs from all of its customers, but must defer estimated lost revenues until the board reviews the issue at the conclusion of the pilot. MidAmerican, which has no power marketing affiliate, may participate as a supplier through a functionally separate corporate unit. Docket No. noi-95-1, Feb. 10, 1998 (Iowa U.B.). </p>
<p> PILOT PROGRAMS (em IDAHO. The Idaho Public Utilities Com- </p>
<p> mission has authorized Washington Water Power Co. to set up a new pilot program that will allow some of its residential and small commercial customers an opportunity to choose from a portfolio of energy services, beyond traditional bundled rates, but without changing energy providers. Despite claims by its staff that the company would be the primary beneficiary of the program, the PUC ruled that experience gained from operation of the pilot would benefit all customers. Case No. wwp-e-97-11, Order No. 27351, Feb. 6, 1998 (Idaho P.U.C.). </p>
<p> WHOLESALE POWER SUPPLY COSTS. The New Jersey Board </p>
<p> of Public Utilities set aside a petition brought by a member of the state legislature seeking lower electric rates for his constituents based on claims that the local utility, Rockland Electric Co., should be made to cancel existing power sales agreements and sell wholesale power from its parent company, Orange and Rockland Utilities, Inc., or through competitive bidding. The BPU said the complaint, while "well intentioned," was premature in light of its ongoing investigation into restructuring the state's electric industry. Docket No. er97010045, Jan. 23, 1998 (N.J.B.P.U.). </p>
<p> EARNINGS SHARING PLAN. The New York Public Service Commission has adjusted an earnings sharing agreement for Brooklyn Union Gas Co. (reducing the cap on equity returns, above which ratepayers would share) in its order approving the company's merger with Long Island Lighting Co. Under a settlement agreement, the merger will take place through a new parent holding company whose subsidiaries would include Brooklyn Union's corporate parent, KeySpan Energy Corp., and Long Island Lighting. The commission found that the agreement would enable both companies to "adapt to the emergence of competition" and will decrease consumers' electric bills. Case 97-m-0567, Feb. 5, 1998 (N.Y.P.S.C.). </p>
<p> STANDARD OFFER SERVICE. The Maine Public Utilities Commission has adopted rules for "standard offer service" for all customers when the state's electric market opens, under state law, beginning March 1, 2000. The SOS will resemble traditional bundled utility service, with a single bill for all service components and regulation of terms and conditions. The winner of a commission-sponsored competitive bidding process will provide the power to the standard offer group for each utility franchise area. The PUC said the SOS process should allow for a "smooth transition to a competitive environment." Docket No. 97-739, Feb. 11, 1998 (Me.P.U.C.). </p>
<p> APPLIANCE REPAIR. The New Jersey Board of Public Utilities </p>
<p> has upheld rates proposed by Public Service Electric and Gas Co. for competitive gas and electric appliance repair services, finding no cross-subsidy from ratepayers receiving regulated services, but has allowed the utility to update terms and conditions of service to address complaints by the Coalition for Fair Competition, a trade organization representing heating, cooling and appliance service contractors. Docket No. ec96070517, Jan. 23, 1998 (N.J.B.P.U.). </p>
<p> News digest is compiled by Lori A. Burkhart and Phillip S. Cross, contributing legal editors, and by Beth Lewis, editorial assistant. </p>
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Fri, 01 May 1998 04:00:00 +0000puradmin9784 at http://www.fortnightly.comNews Digesthttp://www.fortnightly.com/fortnightly/1998/04/news-digest
<div class="field field-name-field-import-byline field-type-text-long field-label-inline clearfix"><div class="field-label">Byline:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Lori A. Burkhart, Phillip S. Cross, and Beth Lewis</p>
</div></div></div><div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">Fortnightly Magazine - April 1 1998</div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p> Federal Agencies </p>
<p> ELECTRIC RETAIL PRICES. The Energy Information Administration has released a new report finding that the average retail price of electricity has declined for the third year in a row and remained stable for the first nine months of 1997. According to Electric Sales and Revenue 1996, average residential electric prices declined slightly in 1996, the first drop for that consumer class since the EIA began collecting data in 1984. Overall average prices of electricity were down nearly 0.5 percent nationwide between the end of 1996 and 1997, while industrial prices were down more than 1 percent. In California, residential prices dropped by 2.4 percent in 1996. The EIA believes three reasons account for the lower prices: falling fuel prices; decreasing labor costs; and lower interest rates on money borrowed. The report is available online at <a href="http://www.eia.doe.gov">www.eia.doe.gov</a>. </p>
<p> LONG-DISTANCE REVENUE. The Federal Communications Commission released a staff report, Long Distance Market Shares, which shows that as of the third quarter of 1997, 83 percent of long-distance revenues went to the four largest long distance carriers: AT&amp;T, MCI, Sprint and WorldCom. The report can be downloaded from the FCC-State Link Internet site at <a href="http://www.fcc.gov/ccb/stats">www.fcc.gov/ccb/stats</a>. </p>
<p> NUCLEAR WATCH LIST. The Nuclear Regulatory Commission has released its revised watch list of 13 nuclear power plants that warrant increased attention. Illinois Power Co.'s Clinton plant was the only plant added to the list; Maine Yankee Atomic Power Co.'s plant, which is being shut down, was the only plant removed from the list. </p>
<p> NUCLEAR WASTE DISPOSAL. As expected, the Department of Energy did not meet its Jan. 31 deadline to begin storage of high-level nuclear waste, as required by a federal court. Under the Nuclear Waste Policy Act of 1982, a permanent waste repository was to have been completed by 1998. But DOE has said that the likely repository at Yucca Mountain, Nevada, will not be ready until 2015 at the earliest. Electric ratepayers so far have paid about $14 billion into the Nuclear Waste Fund. Because the federal government now has defaulted on the deadline, DOE ultimately could be liable for as much as $56 billion in damages, and as much as $24 billion more for replacement power costs. Senator Frank H. Murkowski blasted DOE's failure to meet the deadline: "It's blatantly hypocritical and intellectually dishonest for the Administration to complain about carbon emissions and global warming while¼ putting our largest source of carbon-free energy at risk." </p>
<p> Environmental Issues </p>
<p> NITROGEN OXIDE EMISSIONS (em AUCTIONS. ISO New England will conduct the first multi-state auction of nitrogen-oxide emission reduction credits. ISO-NE members will purchase the credits to offset increases in NOx emissions generated last summer. The rise in emissions stemmed from the operation of certain power plants to avoid electricity capacity shortfalls in New England. The credits will apply to the "ozone season," May through September, and can come from anywhere in New England. </p>
<p> NITROGEN-OXIDE EMISSIONS (em EPA REVIEW. Many concerns were raised at a recent hearing over nitrogen-oxide state implementation plans proposed by the Environmental Protection Agency. Mark Gray, manager of Environmental Services for American Electric Power, said Feb. 3, that the EPA disregarded recommendations of the 37-state Ozone Transport Assessment Group. The group had suggested a range of emission reductions (em from 55 percent to 85 percent (em instead of an "onerous one-size-fits-all" approach. </p>
<p> Utilities, labor groups, and other organizations from the regions that the plan would affect have formed the Alliance for Constructive Air Policy, a coalition that will work with policymakers to find methods to reduce ozone pollution. ACAP members are developing an alternative proposal to EPA's proposal. </p>
<p> The EPA's plan, proposed in November 1997, would require uniform NOx emissions reductions of 85 percent by utilities and other large sources in 22 states in the Midwest, Mid-Atlantic, Southeast and Great Lakes regions. </p>
<p> FERC </p>
<p> GAS PRODUCER REFUNDS. The FERC on Jan. 28 again ruled that natural gas producers must refund to customers approximately $500 million for gas produced in Kansas and sold interstate at rates that included Kansas ad valorem or property taxes. In denying rehearing, the FERC noted that such taxes are not eligible for inclusion in rates under the Natural Gas Policy Act of 1978. Last fall the FERC had ruled that a court ruling left it no choice but to order the refunds. Amoco Production Co., Anadarko Petroleum Corp., Mobil Oil Corp., OXY USA Inc., and Union Pacific Resources must refund the money by mid-March, which the companies claim will produce financial hardship. Legislation introduced in both the U.S. Senate and House of Representatives would require the producers to pay only the principle owed (em not the interest, which makes up nearly 80 percent of the $500 million. Docket Nos. rp97-369-001 et al., Jan. 28, 1998 (F.E.R.C.). </p>
<p> PIPELINE RATEMAKING. While it has issued a certificate to Transcontinental Gas Pipe Line Corp. for construction and operation of its Mobile Bay, Ala., offshore lateral, the FERC nevertheless has denied rehearing of a prior order that approved rolled-in rates instead of incremental pricing. Docket Nos. cp97-92-000, et al., Jan. 28, 1998 (F.E.R.C.). </p>
<p> Transco had argued that it qualified for a presumption of rolled-in rate treatment under the commission's statement of policy on pipeline pricing. See, 71 FERC ¶ 61,241 (1995), order on reh'g., 75 FERC ¶ 61,105 (1996). </p>
<p> Courts </p>
<p> STRANDED COSTS. The New Mexico Supreme Court examined whether state law gives the city of Las Cruces authority to condemn facilities owned by El Paso Electric Co. This issue had been certified to the state Supreme Court by Judge Leslie Smith of the U.S. District Court and the issue has been returned to Judge Smith's court for a final determination. City of Las Cruces v. El Paso Electric Co. et al., No. 23,846, Feb. 10, 1998 (N.M.) </p>
<p> Meanwhile, the Federal Energy Regulatory Commission on Feb. 12 held a hearing to determine how much, if any, stranded costs the city would owe El Paso Electric if it takes over the electric system. Docket No. sc-97-2-000 (F.E.R.C.). </p>
<p> PURCHASED POWER CONTRACTS. The owners of two waste-to-energy generating plants filed a $1.8-billion lawsuit in Palm Beach County Circuit Court against Florida Power &amp; Light Co., alleging contract violations in a dispute related to Florida's largest municipal bond default. The now-shut-down plants are owned by Okeelanta Power and Osceola Power Ltd. Partnership, which are affiliates of PG&amp;E Corp., Bechtel Enterprises, and Flo-Sun Inc. Florida Power &amp; Light entered a contract to purchase the output, but then argued it had no further obligation to continue the purchases because operating deadlines were not met. The owners counter-sued the utility for the $1.8 billion it contracted to pay over 30 years. </p>
<p> TELECOMMUNICATIONS RETREAT. Texas U.S. District Judge Joe Kendall issued a temporary stay of his Dec. 31 ruling striking down key parts of the Telecommunications Act of 1996, pending an appeal by the Federal Communications Commission and long-distance companies. Kendall had found that the Act inflicted serious financial punishment on Bell System operating companies by keeping them out of the long- </p>
<p> distance business. SBC Communications, Inc. v. FCC, No. CIV.A. 7:97-cv-163-x, Dec. 31, 1997 (N.D.Tex.). </p>
<p> WATER PLANT RATE BASE. A Florida appeals court has struck down a state PSC ruling for arbitrarily changing a rate-base method for a wastewater treatment plant. It faulted the PSC for comparing plant capacity against annual average daily flow in place of using the peak-month average daily flow. Florida Cities Water Co. v. Fla. PSC, No. 96-3812, Jan. 12, 1998 1998 WL 5407 (Fla.App.). </p>
<p> State PUCs </p>
<p> LOCAL TELCO COMPETITION. The North Carolina Utilities Com- </p>
<p> mission has turned down a request by Time Warner Communications of North Carolina to offer competitive local exchange telephone service within the service territory of an established local exchange carrier, ALLTEL Carolina Inc., deciding that ALLTEL did not lose an exemption protecting its franchise territory from competition simply because one of its affiliates, ALLTEL Communications, had received certification as a competitive local carrier. (Under the state's telephone reform law, LEC franchise territories with less than 200,000 access lines are exempt from competition if the incumbent carrier does not compete outside its area or elect price regulation.) Docket No. p-472, Sub 6, Jan 7, 1998 (N.C.U.C.). </p>
<p> LOCAL TELCO RATES. The New Jersey Board of Public Utilities </p>
<p> approved a schedule of rates for local exchange services to be offered by MFS Intelenet of New Jersey Inc., a new entrant in the state's local telephone market. In doing so it ruled that a detailed cost review was not justified because the new carrier has no captive customers, and any customers it might attract can easily obtain local service from Bell Atlantic-New Jersey Inc., the incumbent carrier. The board added that the proposed rates could not be considered unreasonable considering the "competitive posture" of the new carrier, and the "procompetitive policies of both federal and state law." Docket No. tt97010043, Jan. 7, 1998 (N.J.B.P.U.). </p>
<p> NEED FOR POWER. The Alabama Public Service Commis- </p>
<p> sion authorized Alabama Power Co. to build an 800-megawatt, combined-cycle generating unit at its existing Barry Steam Plant facility. The PSC rejected claims by independent power producers that the utility had failed adequately to consider whether retail competition would mitigate its need for power. The commission said that the utility must clearly have additional capacity by 2001 to maintain reliable service and that the form and extent of changes in the state's electric industry structure were not yet certain. It also rejected claims by the IPPs that the company's plan was flawed because the need for power could be satisfied at a lower cost through the construction of combustion turbine units by competitive suppliers. It said that such an analysis failed to consider the need to minimize the "total cost" of generation by balancing the amounts of peaking, intermediate and baseload capacity. Docket No. 26115, Dec. 12, 1997 (Ala.P.S.C.). </p>
<p> TELCO/CABLE CROSS-SUBSIDY. The Michigan Public Service Commission directed Ameritech Michigan, a local exchange carrier, to stop participating in a marketing program with an affiliated cable television company, Ameritech New Media Inc. Other cable providers in the state had complained that Ameritech violated state law by offering checks to prospective customers redeemable for telephone service as an inducement to subscribe to New Media's "Americast" cable service. The PSC ruled that the issuance of the pre-signed, pre-dated "AmeriChecks" by the LEC, while drawn on a New Media Bank account, violated state rules banning provision of regulated service "in combination with an unregulated service." It rejected claims by the LEC that the law did not apply because the promotion involved "different corporate entities" and found that the opportunity for customers to use AmeriChecks as a discount or offset against tariffed rates for regulated services "cemented the ties creating a combination of regulated and unregulated services." Case No. u-11412, Dec. 19, 1997 (Mi.P.S.C.). </p>
<p> ELECTRIC RATE RESTRUCTURING. The Arkansas Public Service </p>
<p> Commission has authorized Entergy Arkansas Inc. to restructure its rates in anticipation of competition, permitting the utility to reduce rates and increase the pace of amortization for its nuclear generating investment. It added that it "expects the utility to¼ actively promote retail electric competition in Arkansas." </p>
<p> The approved rate restructuring plan includes: (1) rate reductions of $155 million in 1998 and $62 million beginning in 1999; (2) rate design moves to eliminate interclass subsidies without rate increases; (3) rate stability until July 1, 2001; (4) ratepayer protection against rate increases associated with loss of wholesale load; and (5) the capture of excess annual earnings and the earmarking of such funds for payment of potential future ratepayer liability for stranded costs. Docket No. 31, Dec. 12, 1997 (Ark.P.S.C.). </p>
<p> CUSTOMER AGGREGATION. Enron Energy Services has filed </p>
<p> a complaint with the state Ohio PUC challenging as "uncompetitive" a proposed long-term aggregation contract for Ohio Edison Co. to supply several McDonald's restaurants with electricity. Ohio Edison is proposing to give McDonald's a discounted electric rate in return for becoming the exclusive supplier for 10 years. Ohio Edison, a subsidiary of FirstEnergy Corp., has filed suit in the Ohio Supreme Court challenging the PUC's aggregation plan. </p>
<p> PUBLIC POLICY PROGRAMS. The New York Public Service Commission on Feb. 2 issued an order establishing policies for the administration of its Systems Benefits Charge, which will be used to promote energy efficiency and public policy programs during the transition to competition. The order designates the New York Energy Research and Development Association as a third-party administrator for SBC funds, which will be collected by the utilities over the next three years. Case 98009/94e0952, Feb. 2, 1998 (N.Y.P.S.C.). </p>
<p> ELECTRIC RESTRUCTURING PLANS. The New York PSC has </p>
<p> approved a five-year modified rate and restructuring plan for New York State Electric and Gas Corp., which allows all customers to choose their supplier of electricity by Aug. 1, 1999, and provides for overall customer savings of $725 million. Chairman John F. O'Mara noted that the plan implements "one of the most aggressive timetables for customer choice." Rates for large industrial customers and high load-factor customers will be reduced by 5 percent annually. Residential and small commercial customer rates will be frozen at present levels for the first four years of the plan, with a 5 percent reduction taking effect in the fifth year. Case 98005/96e0891, Jan. 27, 1998 (N.Y.P.S.C.). </p>
<p> RETAIL CHOICE. Following approval from the New York PSC, </p>
<p> Consolidated Edison Co. of New York Inc. on Feb. 3 revealed details of its retail choice program, to begin June 1 for about 63,000 customers. At that time, 500 megawatts of electricity will become subject to retail competition, with choice phased-in for all customers by year-end 2001. Each customer who chooses a supplier other than ConEdison will receive two bills: one for delivery of the electricity from ConEdison, and the other for the commodity sold by energy service companies. Starting in February, ConEdison bills will contain a "retail choice shopping credit," which will show how much customers can save if they purchase electricity from another supplier. The utility will pay a one-time, $50 incentive to residential and religious rate class customers, and $75 to small nonresidential customers to encourage participation in retail choice programs. </p>
<p> Mergers &amp; Acquisitions </p>
<p> RATEPAYER BENEFITS. The New Jersey Board of Public Utili- </p>
<p> ties approved the merger of Atlantic City Electric Co., and Delmarva Power and Light Co. to form a new company, Conectiv Inc. The board rejected calls for the application of stricter standards when reviewing such cases. Consumer advocates had alleged that the board should switch from a "no harm test" in reviewing merger and reorganization applications to a test that requires a showing of a "positive benefit" to ratepayers. The board said that it had used the stricter test in only two cases in recent history, and that one involved a hostile takeover bid. It went on to find that the merger would save ratepayers $15.75 million annually and that voluntary labor force reductions would limit the effects of merger-related layoffs. Docket No. em97020103, Jan. 7, 1998 (N.J.B.P.U.). </p>
<p> CANADIAN GAS SERVICES. The boards of directors of Trans- </p>
<p> Canada PipeLines Ltd. and NOVA Corp. on Jan. 26 agreed to merge the companies to create the fourth largest energy services company in North America. The new company will hold $16 billion in revenues and $21 billion in assets. NOVA shareholders will exchange each NOVA share for 0.52 TransCanada shares, and then the new company will be divided into separate energy and chemicals businesses. The companies believe that the merger will allow them to offer low-cost flexible services from the Western Canada Sedimentary Basin to end-users in North American markets. </p>
<p> Restructuring Electric Legislation </p>
<p> New bills are on deck, but many are facing rough sledding. </p>
<p> CONNECTICUT. Legislators had hoped to have a bill ready on </p>
<p> Feb. 4 and go to public hearing within two weeks from that date. The new bill closely resembles last year's failed bill. </p>
<p> INDIANA. SB 431, passed through the Senate Commerce and </p>
<p> Consumer Affairs Committee. But the electric bill is expected either not to make it to the full Senate for a vote, or to have all its key components removed. Because the state's major utilities disagree on restructuring, the legislators want to involve them in discussions to write another restructuring bill that would be considered next year. </p>
<p> NEW MEXICO. The Public Utility Commission sent draft leg- </p>
<p> islation to the legislature proposing to open the state's electric market to retail customer choice beginning Jan. 1, 2001. The PUC also submitted a report to the governor and the Legislature explaining choice from the customers' perspective by using extensive cost and socioeconomic data for all regions of the state. The draft leaves to further commission review the question of stranded cost recovery and functional separation of generation from other utility activities. Under the draft legislation, restructuring must produce stabilized or reduced rates and provide incentives for demand-side management and customer conservation efforts. Case No. 2681, Jan. 28, 1998 (N.M.P.U.C.). </p>
<p> OKLAHOMA. State Sen. Kevin Easley introduced SB 888, which </p>
<p> would have accelerated completion of restructuring studies required by the Electric Restructuring Act of 1997. But the Easley bill is stymied in committee. </p>
<p> SOUTH CAROLINA. The PSC denied a request by an electric pro- </p>
<p> vider, Electric Lite, to restructure the electric industry without legislation. It issued its own proposal for restructuring the state's electric industry, but cautioned that "there may be little to gain and much to lose" from competition. That bill will be pitted against an electric restructuring bill on the table by Rep. Doug Smith, which calls for immediate restructuring of the electric industry. The PSC recommended functional unbundling, a regional ISO and a five-year transition period for full implementation of customer choice. They would examine the need for a power exchange that allows for bilateral contracts. If permitted by the state legislature, utilities would recover "verifiable stranded costs over a reasonable period." </p>
<p> VIRGINIA. Two disparate electric restructuring bills are up for </p>
<p> consideration, one largely authored by Virginia Power. The latter does not commit to a date certain for retail choice, and the former, introduced by state Sen. Jackson Reasor Jr., would phase-in retail competition through 2004. But while Virginia Power wants its bill considered this legislative session, which ended March 14, Reasor prefers both bills be carried over to the 1999 legislative session. </p>
<p> WASHINGTON. State Sen. Lisa Brown introduced SB 6560, the Electric Consumers Protection Act, would require extensive rate disclosure and enact dispute resolution procedures. Also, when marketing power, utilities would have to identify the types of resources used to generate power, and the amount of air emissions produced. But it appears that SB 6560 likely will be killed in the House, in favor of a bill only requiring utilities to unbundle their costs of service on electric bills. </p>
<p> Business Wire </p>
<p> LOU L. PAI, Chairman and CEO of Enron Energy Services said </p>
<p> Enron plans to make "PECO-type" offers to other investor-owned utilities in the future. He promised that these offers would be made on a "more friendly basis," however. (Enron had asked the Pennsylvania PUC to allow it to become the provider of last resort to PECO's customers.) Pai predicted that Pennsylvania could become an energy hub because well-written legislation will attract businesses. The company announced plans to make major investments in the state. On the other hand, Pai pronounced that the California Independent System Operator and Power Exchange system "doesn't work¼ We see a humor in this." </p>
<p> CNG Energy Services Corp. and Cendant Corp. have agreed to jointly make available CompleteHome to CNG customers. The companies will offer CompleteHome service, one of Cendant's energy advantage programs, to more than 1.5 million CNG customers. The CompleteHome membership program offers discounts of 10 to 50 percent on the purchase of more than 100,000 name-brand home products from manufacturers such as GE, Black &amp; Decker, Sony and Maytag and home service companies such as True Value, Merry Maids, Chem Dry, Terminix and TruGreen-Chemlawn. </p>
<p> CellNet Data Systems Inc. and DukeSolutions, a subsidiary of Duke Energy, announced a contract under which CellNet will provide data communications services to DukeSolutions and Duke Energy Trading and Marketing customers over its new California network. The contract also includes an option to expand service coverage to any additional networks CellNet may build in other states. The agreement with DukeSolutions is Cellnet's fifth agreement with a major ESP to provide data communications services over its new California network. </p>
<p> News digest is compiled by Lori A. Burkhart and Phillip S. Cross, contributing legal editors, and by Beth Lewis, editorial assistant. </p>
</p>
<p></p>
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<a href="/tags/alabama-power">Alabama Power</a><span class="pur_comma">, </span><a href="/tags/american-electric-power">American Electric Power</a><span class="pur_comma">, </span><a href="/tags/anadarko">Anadarko</a><span class="pur_comma">, </span><a href="/tags/att">AT&amp;T</a><span class="pur_comma">, </span><a href="/tags/atc">ATC</a><span class="pur_comma">, </span><a href="/tags/aye">AYE</a><span class="pur_comma">, </span><a href="/tags/bc">BC</a><span class="pur_comma">, </span><a href="/tags/benefits">Benefits</a><span class="pur_comma">, </span><a href="/tags/california-independent-system-operator">California Independent System Operator</a><span class="pur_comma">, </span><a href="/tags/cap">CAP</a><span class="pur_comma">, </span><a href="/tags/ces">CES</a><span class="pur_comma">, </span><a href="/tags/citi">Citi</a><span class="pur_comma">, </span><a href="/tags/commission">Commission</a><span class="pur_comma">, </span><a href="/tags/communication">Communication</a><span class="pur_comma">, </span><a href="/tags/delmarva-power">Delmarva Power</a><span class="pur_comma">, </span><a href="/tags/department-energy">Department of Energy</a><span class="pur_comma">, </span><a href="/tags/doe">DOE</a><span class="pur_comma">, </span><a href="/tags/duke-energy">Duke Energy</a><span class="pur_comma">, </span><a href="/tags/eia">EIA</a><span class="pur_comma">, </span><a href="/tags/eia-0">EIA</a><span class="pur_comma">, </span><a href="/tags/el-paso-electric">El Paso Electric</a><span class="pur_comma">, </span><a href="/tags/energy-information-administration">Energy Information Administration</a><span class="pur_comma">, </span><a href="/tags/energy-information-administration-0">Energy Information Administration</a><span class="pur_comma">, </span><a href="/tags/entergy">Entergy</a><span class="pur_comma">, </span><a href="/tags/environmental-protection-agency">Environmental Protection Agency</a><span class="pur_comma">, </span><a href="/tags/epa">EPA</a><span class="pur_comma">, </span><a href="/tags/ev">EV</a><span class="pur_comma">, </span><a href="/tags/fcc">FCC</a><span class="pur_comma">, </span><a href="/tags/federal-communications-commission">Federal Communications Commission</a><span class="pur_comma">, </span><a href="/tags/federal-energy-regulatory-commission">Federal Energy Regulatory Commission</a><span class="pur_comma">, </span><a href="/tags/ferc">FERC</a><span class="pur_comma">, </span><a href="/tags/firstenergy">FirstEnergy</a><span class="pur_comma">, </span><a href="/tags/firstenergy-corp">FirstEnergy Corp.</a><span class="pur_comma">, </span><a href="/tags/fit">FIT</a><span class="pur_comma">, </span><a href="/tags/florida-power-light">Florida Power &amp; Light</a><span class="pur_comma">, </span><a href="/tags/gas">GAS</a><span class="pur_comma">, </span><a href="/tags/ge">GE</a><span class="pur_comma">, </span><a href="/tags/ice">ICE</a><span class="pur_comma">, </span><a href="/tags/ipp">IPP</a><span class="pur_comma">, </span><a href="/tags/irg">IRG</a><span class="pur_comma">, </span><a href="/tags/iso">ISO</a><span class="pur_comma">, </span><a href="/tags/iso-new-england">ISO New England</a><span class="pur_comma">, </span><a href="/tags/iso-ne">ISO-NE</a><span class="pur_comma">, </span><a href="/tags/it">IT</a><span class="pur_comma">, </span><a href="/tags/michigan-public-service-commission">Michigan Public Service Commission</a><span class="pur_comma">, </span><a href="/tags/nee">NEE</a><span class="pur_comma">, </span><a href="/tags/new-jersey">New Jersey</a><span class="pur_comma">, </span><a href="/tags/new-jersey-board-public-utilities">New Jersey Board of Public Utilities</a><span class="pur_comma">, </span><a href="/tags/new-york-psc">New York PSC</a><span class="pur_comma">, </span><a href="/tags/new-york-public-service-commission">New York Public Service Commission</a><span class="pur_comma">, </span><a href="/tags/nuclear">Nuclear</a><span class="pur_comma">, </span><a href="/tags/nuclear-regulatory-commission">Nuclear Regulatory Commission</a><span class="pur_comma">, </span><a href="/tags/nuclear-waste-fund">Nuclear Waste Fund</a><span class="pur_comma">, </span><a href="/tags/nuclear-waste-policy-act">Nuclear Waste Policy Act</a><span class="pur_comma">, </span><a href="/tags/ohio-edison">Ohio Edison</a><span class="pur_comma">, </span><a href="/tags/peco">PECO</a><span class="pur_comma">, </span><a href="/tags/pge">PG&amp;E</a><span class="pur_comma">, </span><a href="/tags/ram">RAM</a><span class="pur_comma">, </span><a href="/tags/reg">REG</a><span class="pur_comma">, </span><a href="/tags/res">RES</a><span class="pur_comma">, </span><a href="/tags/rgi">RGI</a><span class="pur_comma">, </span><a href="/tags/state-implementation-plans">state implementation plans</a><span class="pur_comma">, </span><a href="/tags/storage">storage</a><span class="pur_comma">, </span><a href="/tags/str">STR</a><span class="pur_comma">, </span><a href="/tags/tep">TEP</a><span class="pur_comma">, </span><a href="/tags/transco">Transco</a><span class="pur_comma">, </span><a href="/tags/ubs">UBS</a><span class="pur_comma">, </span><a href="/tags/yucca-mountain">Yucca Mountain</a> </div>
</div>
Wed, 01 Apr 1998 05:00:00 +0000puradmin9763 at http://www.fortnightly.comParties Push DOE for Answershttp://www.fortnightly.com/fortnightly/1997/07/parties-push-doe-answers
<div class="field field-name-field-import-byline field-type-text-long field-label-inline clearfix"><div class="field-label">Byline:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Lori A. Burkhart</p>
</div></div></div><div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">Fortnightly Magazine - July 1 1997</div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>In response to an April 30 federal court order, parties suing the Department of Energy over nuclear waste storage have asked the court to require DOE to submit a detailed description within 30 days of its plan to begin removing radioactive waste from nuclear power plants.</p>
</p>
<p> Parties to the suit (em numbering 103 (em on May 7 also asked the court for permission to escrow more than $600 million in annual payments into the fund. </p>
<p> In the April 30 order, the court ruled that petitions filed in the nuclear waste storage lawsuit against the DOE will be treated as petitions to compel DOE to comply with a previous court decision finding that DOE's obligation to begin storing nuclear waste begins Jan. 31, 1998. The court in effect put the case on a fast track. </p>
<p> The original petitioners had sued the DOE to protect payments into the Nuclear Waste Fund and to compel DOE to take the waste although no storage site has been chosen. </p>
<p></p>
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Tue, 01 Jul 1997 04:00:00 +0000puradmin10262 at http://www.fortnightly.comCourts, Tunnel Completion Pave the Way for Nuclear Disposalhttp://www.fortnightly.com/fortnightly/1997/06-0/courts-tunnel-completion-pave-way-nuclear-disposal
<div class="field field-name-field-import-byline field-type-text-long field-label-inline clearfix"><div class="field-label">Byline:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Lori A. Burkhart</p>
</div></div></div><div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">Fortnightly Magazine - June 15 1997</div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>The U.S. Court of Appeals for the District of Columbia on April 30 ruled that petitions filed in the nuclear waste storage lawsuit against the Department of Energy will be treated as petitions to compel the department to comply with a July 1996 court decision ordering the DOE to store nuclear waste beginning Jan. 31, 1998.</p>
</p>
<p> Meanwhile, a tunnel boring machine broke through the earth's surface at Yucca Mountain, Nevada (em the proposed storage site for the spent nuclear waste (em completing a five-mile dig that went as deep as 1,400 feet beneath the crest of the mountain. </p>
<p> The petitioners of the suit against DOE, which includes 49 state agencies and 42 utilities, seek to protect payments into the Nuclear Waste Fund. The lawsuits asked the federal court to stop payments into the nuclear waste fund, to escrow more than $600 million in nuclear waste fees collected annually and for other remedies. </p>
<p> But the court put the case on a fast-track schedule and limited filings as it moved on a course to force the DOE to take nuclear waste in 1998. </p>
<p> "This is the second time in only six weeks that the court has taken very unusual and positive steps in our suit against DOE," said Don Keskey of the Michigan Attorney General's Office, and lead attorney for the state's lawsuit against DOE. </p>
<p> Advocates for use of Yucca Mountain as a permanent storage site for nuclear waste pointed to the completion of the excavation on April 25 as a tremendous achievement. "Setting aside for a moment the fact that DOE's disposal program is 15 years behind schedule, this particular engineering phase of the Yucca Mountain study is one government project that actually is being completed ahead of schedule," said Nuclear Energy Institute Vice President John Kane. </p>
<p> "It also provides tangible evidence that one of the Clinton Administration's primary arguments against the Nuclear Waste Policy Act pending in Congress is hollow," he added. (That act allowing for temporary nuclear waste storage at the Nevada Test Site was passed by the Senate on April 15. The bill awaits House action.) </p>
<p> The tunnel boring machine began digging the 25-foot diameter tunnel beneath Yucca Mountain in September 1994. The excavation made possible an array of studies of geology, hydrology, thermal issues and other sciences. </p>
<p> Under a law passed in 1982, the Department of Energy is obligated to begin storing used nuclear fuel by the end of January 1998. But DOE has given notice to the nation's nuclear utilities that it intends to default on its obligation to accept the used fuel.</p>
<p></p>
<p><center>39</center>
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Sun, 15 Jun 1997 04:00:00 +0000puradmin10228 at http://www.fortnightly.comNuclear Waste Debate Simmers on Capital Hillhttp://www.fortnightly.com/fortnightly/1997/06/nuclear-waste-debate-simmers-capital-hill
<div class="field field-name-field-import-byline field-type-text-long field-label-inline clearfix"><div class="field-label">Byline:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Lori A. Burkhart</p>
</div></div></div><div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">Fortnightly Magazine - June 1 1997</div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>A Contentious Bill Passes Senate (em Two Votes Shy of Blocking a Veto</p>
</p>
<p> Recently passed by the U.S. Senate, nuclear waste bill S. 104 lies mired in quicksand, facing a promised presidential veto, not to mention attacks from senators representing those states targeted for possible waste storage sites. Disposal of waste from the nation's nuclear generating plants has turned into possibly the most contentious issue on Capitol Hill. </p>
<p> Sen. Frank H. Murkowski (R-Alaska) showed how serious he was about nuclear waste disposal last February when he held up confirmation of Energy Secretary Federico Peña. He would not allow the appointment to move forward until he received assurances from the Clinton Administration that it would consider safe interim storage for the high-level radioactive waste. </p>
<p> On April 15, the Senate passed The Nuclear Waste Policy Act of 1997, S. 104, by a vote of 65-34. Murkowski, chair of the Senate Committee on Energy and Natural Resources, had proposed the bill, which calls for interim storage of nuclear waste now stored at 80 locations in 41 states. The waste would be stored at the Nevada Test Site, which had previously been used to explode nuclear weapons. It would remain at the temporary site until a location for permanent storage (em presently proposed for Yucca Mountain, Nevada (em could be made ready. </p>
<p> Nevada's two Democrat Senators, Richard Bryan and Harry Reid, remain adamant that their state (which has no working nuclear plants) should not take on the risks associated with nuclear waste storage. In fact, when Murkowski scheduled April 8 for debate on S. 104, he had to maneuver to cut off a filibuster threatened by the Nevada senators. </p>
<p> And the Office of Management and Budget has advised in a "Statement of Administration Policy" that in its present form, the President would veto the bill. </p>
<p> Meanwhile, a federal circuit court recently has denied a motion by the Department of Energy to dismiss a lawsuit filed against it by 46 state agencies and 36 nuclear utilities on behalf of ratepayers who have paid more than $13 billion into the Nuclear Waste Fund. The lawsuit seeks a court order to compel the federal government to take possession of waste for interim storage by 1998. However, even if Yucca Mountain is approved for storage (em it would not be ready to store waste until approximately 2015. On April 30, the court put the proceeding on the fast track. It ruled that future filings in the waste lawsuit will be treated as petitions to compel DOE to comply with a previous court decision finding that DOE's obligation to store nuclear waste begins Jan. 31, 1998. </p>
<p> Murkowski vs. Clinton </p>
<p> In the lingo of Capitol Hill, "debate on the motion to proceed" on S. 104 began in earnest on the afternoon of April 7. On that day, Murkowski offered significant changes to his bill to address concerns expressed by colleagues. Murkowski offered the following amendments: </p>
<p> • Extend the schedule for siting and licensing an interim facility (to June 30, 2003, if Yucca is viable, and June 30, 2005, if it is not); </p>
<p> • Require licensing of the interim facility by the Nuclear Regulatory Commission under existing regulations, with no exceptions; </p>
<p> • Shorten the license term of the interim </p>
<p> facility to 40 years and reduce its initial capacity to 33,100 metric tons (from Murkowski's proposed 60,000 metric tons); and </p>
<p> • Preempt any state and local laws (not federal) that remain inconsistent with the provisions of the Atomic Energy Act and Hazardous Materials Transportation Act. </p>
<p> Murkowski had offered those changes to help "veto-proof" the bill, and the Senate approved the changes. But on that same day, the Clinton Administration came out with more objections. </p>
<p> The administration objected to provisions in the bill that would stop the Environmental Protection Agency from setting acceptable radiation release standards. Murkowski acquiesced, and said he would provide for the EPA to set radiation standards for the permanent repository. S. 104 had set a 100-millirem dose standard, subject to review to protect public safety. Now the bill mandates full EPA involvement in setting risk-based radiation protection standards likely to produce a standard of 25 to 30 millirems. Finally, critics were irked that S. 104 did not require the NRC in its Environmental Impact Statement to evaluate the impacts of transporting fuel to the storage facility. So Murkowski added a provision clearly requiring a generic analysis of the impacts of transporting used fuel to the storage facility. </p>
<p> Since President Clinton had vowed to veto S. 104, the vote took on an added importance: Could Murkowski muster the two-thirds vote needed (in each House) to override a Presidential veto? The vote came in at 65-34, with absentee Sen. John D. Rockefeller IV (D-W.V.) saying he would vote "no." Thus Murkowski appears two votes shy of a veto override. However, Murkowski remains confident he can convince one of two Republicans voting against the measure (Ben Nighthorse Campbell of Colorado and Daniel R. Coats of Indiana) to switch. At the same time, the Nevada Senators also said they had promises of switches from among the 12 Democratic senators voting for the bill, which would uphold a veto. </p>
<p> Nevada vs. The World </p>
<p> The Nevada senators opposed to the bill have said the waste should stay where it is now (em at temporary on-site locations licensed by the NRC (em at the nation's 109 nuclear power reactors. However, Murkowski does not believe that on-site reactor storage ponds were built for long-term storage. He has pointed to reports that radioactive tritium gas is </p>
<p> leaking into Suffolk County, Long Island's ground water from a spent-fuel storage pond at the Brookhaven lab. Murkowski is a firm believer in the need for a centralized storage location. Also, the storage pools are filling up (em by 1998, 23 pools in 14 states will be unable to take any more spent fuel. </p>
<p> On April 10, the Senate voted 72-24 to table an amendment to the bill presented by the Nevada senators. The amendment would have required separate approval by the governors of those states that straddled any transportation route for waste moving to Nevada. The senators refer to the risks associated with transporting the waste to Nevada as "mobile Chernobyl." Murkowski disputes that moniker. </p>
<p> "The fact is that there have been 2,500 shipments of used fuel across this country in the last twenty years," Murkowski said in his April 7 statement. Those shipments will continue, according to Murkowski (em "by truck, by train, by barge, by boat." </p>
<p> On April 10 the Senate approved an amendment presented by Sen. Strom Thurmond (R-S.C.) that would prevent the Savannah River nuclear facility from being considered as a permanent storage site should Yucca Mountain be derailed. The Senate also voted to give the same exemption to the Oak Ridge reservation in Tennessee. Language in S. 104 partly prompted the amendments, which would allow the building of one central, temporary site, or another site chosen by the president. </p>
<p> Also on April 10, in the House of Representatives, Reps. Fred Upton (R-Mich.) and Ed Towns (D-N.Y.), along with 56 other members of both parties, had introduced "The Nuclear Waste Policy Act of 1997," H.R. 1270. The bill is similar to legislation supported by almost 300 representatives in the 104th Congress. t </p>
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Sun, 01 Jun 1997 04:00:00 +0000puradmin10202 at http://www.fortnightly.comFinancial Newshttp://www.fortnightly.com/fortnightly/1997/05-0/financial-news
<div class="field field-name-field-import-byline field-type-text-long field-label-inline clearfix"><div class="field-label">Byline:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Stephen Maloney</p>
</div></div></div><div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">Fortnightly Magazine - May 15 1997</div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>S&amp;Ls won damages when the feds reneged on promises. Utilities could do the same.</p>
</p>
<p> It's tough to be a utility CFO these days. For decades, electric utilities have served both as target and conscripted agent of government policy. Utilities pay disproportionately high taxes. Utility rate structures further distort market forces with subsidies flowing from business to residential. These policies actually defeat market forces. To large measure, many of these market failures arise from reconciling the hangover from uneconomic policy initiatives. </p>
<p> Nevertheless, electric utilities certainly are not the only companies routinely buffeted by capricious government policy. When financial markets boomed in the 1980s, savings and loan associations fell victim to government policies devised for a simpler time. Only when many S&amp;Ls faced imminent demise did the Reagan Administration induce stronger S&amp;Ls to harvest the weak in consideration for relaxing the constraints on entering new markets. </p>
<p> The S&amp;L experience also demonstrated how public policy can sometimes play out like a contact sport. S&amp;Ls who climbed out on the limb got caught in the cross-fire as Congress chopped off the Administration's deregulation changes without warning. Many thrifts plunged immediately into receivership (em victimized by doing a deal with the government. Taxpayers picked up some of the tab for this partisan "gamesmanship." </p>
<p> Commercial nuclear power has seen its share of policy swings over the years. Government induced many utilities to invest heavily in the technology, promising a stable regulatory environment, capital recovery, a reasonable rate of return and custodial services for the spent nuclear fuel. </p>
<p> As with the S&amp;Ls, utilities, too, put their capital on the line, only to look on helplessly as the federal government often failed to deliver on its commitments. With each reneged promise, ever greater uncertainty chipped away at nuclear power plant valuation. With each new uncertainty, the tally for stranded investment rose, complicating the move to fully competitive power markets. </p>
<p> Vindication may be at hand, however, if not a substantial dowry. It may come from a recent U.S. Supreme Court decision, United States v. Winstar, which allowed S&amp;Ls to sue the government for damages. If the Winstar doctrine means what it says, it could pave the way for electric utilities to seek damages from the Department of Energy for its refusal to deal responsibly with spent nuclear fuel. </p>
<p> DOE's Failed Responsibility </p>
<p> Custody of spent nuclear fuel marks perhaps the most significant uncertainty and unkept promise in the long history of utility regulation. This highly radioactive waste has been accumulating at nuclear reactors for decades at an annual rate of about 30 metric tons per reactor. </p>
<p> When the plants were built, spent fuel pools seemed an afterthought, a convenient temporary storage for those "few years" required for the federal government to develop a high-level nuclear waste program. Now, convenient storage is bursting at the seams. The lack of any additional on-site storage capacity threatens to shorten the useful lives of nuclear plants. </p>
<p> Congress thought it solved the problem in 1982 with the Nuclear Waste Policy Act. The act provided a standard contract for each utility. The U.S. DOE would collect a fee for accepting spent nuclear fuel by Jan. 1, 1998. The Nuclear Waste Fund (NWF), a separate fund of the U.S. Treasury, was established by Congress to cover nuclear waste disposal costs. NWPA set the fee at 1 mill per kilowatt-hour. </p>
<p> Like clockwork, the money went into the NWA. And, like Social Security, money not committed to these activities went into government securities. The nuclear fund is starting to look like Social Security in many other ways. </p>
<p> By the end of 1996, close to $13 billion had been collected, while more than $6 billion was spent to develop a repository at Yucca Mountain, Nevada. The fund still counts another $2 billion as a receivable. Yet, development of the repository stalled for reasons ranging from the geological (salt dome stability) to the theological (certain Native Americans consider the site sacred). With each delay, the January 1998 deadline slips further and further away. Meanwhile, the spent fuel pools filled up. </p>
<p> DOE finally admitted in 1993 it would miss the deadline. But DOE also broke new legal ground by claiming no legal duty to take the spent fuel in 1998 if the repository was not ready. Of course, DOE said utilities were still responsible for paying the one-mill levy. To make matters worse, those NWF government securities slipped over into government assets for deficit reduction purposes (em a novel accounting approach, not to mention innovative tax policy. </p>
<p> The government might duck responsibilities and divert money, but utilities have businesses to run. Facing expropriation on such a grand scale (em and approximately 36,000 metric tons of spent nuclear fuel (em Northern States Power Co. and Consolidated Edison Co. initiated a legal campaign to hold DOE's feet to the fire. Eventually joined by almost half the nuclear industry, the utilities achieved a remarkable victory in 1996 in Indiana-Michigan Power Co. v. Dept. of Energy, 88 F.3d 1272 (D.C.Cir.), handed down on May 30 of last year. </p>
<p> Fortunately for the stockholders, the court ruled a contract is a contract: Utilities were paying fees so DOE had a duty to accept the fuel. Which brings us to the present. </p>
<p> Since the DOE trucks will not roll this January, there will be damages. DOE has said it will not start accepting fuel until 2010 to 2015, which means the damages will continue for a long time. The longer the utilities are denied relief, the longer DOE receives its money and the longer the utilities receive nothing in return. So, we're talking Big Damages. </p>
<p> This past January, 36 nuclear utilities went back to the U.S. Court of Appeals asking for relief from having to continue paying into the Nuclear Waste Fund. The utilities also asked the court to enjoin DOE from taking action for suspending further payment. And, perhaps most important, the utilities asked the court to order DOE to develop a plan to begin taking custody of spent fuel. </p>
<p> Presently, utilities are not seeking recission damages (em the $13 billion. They simply want to see DOE perform as promised. As for the $6 billion, which, for all practical purposes, has been siphoned off for unrelated deficit reduction purposes, it must be put back. </p>
<p> The immediate damages are also significant. Each reactor faces costs of $50 million to $60 million for dry cask storage. With more than 100 reactors in the U.S. fleet, casks alone total more than $5 billion. Unfortunately, not every reactor can put dry cask storage on site. Those plants must shut down when their spent fuel pools reach capacity, which will occur long before their scheduled decommissioning dates. </p>
<p> Utilities also face increased decommissioning costs. Plants unable to license dry casks will also suffer lost revenues for premature closure of plants that reach "full date," employee termination costs and lost investment opportunities. Utilities can make a legitimate claim that these costs lie within the responsibility of the federal government as a result of a breach of contract. </p>
<p> The Right to Force Action </p>
<p> Fortunately for ratepayers and stockholders, there is an important precedent for recovery of damages. When Congress drove scores of S&amp;Ls into the abyss, at least one S&amp;L took the matter to court. The case was ultimately decided by the U.S. Supreme Court in United States v. Winstar. The court found the government breached its contract with the S&amp;Ls (em just like Indiana-Michigan. </p>
<p> Winstar permits S&amp;Ls to bring damage suits against the government. A growing number of S&amp;Ls are pursuing such claims. </p>
<p> With Winstar, utilities have the basis to pursue recovery of damages owed from the DOE's continuing recalcitrance. And, despite past timidity by some companies to litigate on stockholder and ratepayer behalf, utilities can be expected to aggressively pursue Winstar breach claims. With these stakes, stockholders and regulators will not accept anything less. The stakes are just too big to ignore and too important to responsibly sign away in a legislative deal. </p>
<p> For example, with DOE's continuing default, both indirect and consequential damages will arise that are associated with capital market discounting of nuclear plant valuations, particularly those associated with underfunded decommissioning costs. There is also the financial risk and uncertainty associated with the DOE having to come back to seek additional money beyond the $13 billion collected to date. Finally, there are the lost investment opportunities on the dawn of electricity's competitive age. </p>
<p> Utilities are not the only parties at risk. If the nuclear reactor construction cost overruns offer any guide, the taxpayers can also expect that a Yucca Mountain facility circa 2010 will rise in cost by multiples that will dwarf the bill for a 1998 repository. Simulations suggest costs total as much as $20 billion to $30 billion more. </p>
<p> Most calculations match current estimates before the Republican leadership in the Senate (em $400 million to $700 million per reactor. Assuming 100 reactors, the potential exposure to the federal government is on the order of $40 billion to $70 billion. And the clock is ticking. </p>
<p> Most of the world's great stories are touched by the brush of justice. Some may call it irony. But, as the End of Days approaches for the current generation of nuclear power plants, there is something poetic to the potential recovery of stranded investments by the application of the most basic contract law to government policy. Hopefully, the hapless utilities will be remunerated in time to save their businesses. </p>
<p> Stephen Maloney is president of Devonrue LTD, a consulting firm to power and telecommunications companies. </p>
<p> Estimating Damages </p>
<p> The price tag on DOE inaction keeps increasing </p>
<p> If the DOE does not begin taking fuel in 1998, federal government inaction will cost the nation's nuclear utilities billions of dollars. As the length of the default increases so does the cost to consumers. For example, if the DOE does not accept fuel until 2030, cost for used fuel management could range from $34 billion to $56 billion, as the chart below illustrates. </p>
<p> Potential Federal Liability (in billions) </p>
<p> Low High </p>
<p> Estimate Estimate </p>
<p> Utility used fuel management costs: </p>
<p> On-site storage $1.2 $1.2 </p>
<p> Extended storage after plant shutdown $9.2 $18.4 </p>
<p> Total fuel management costs $10.4 $19.6 </p>
<p> Refund of past nuclear waste </p>
<p> fund payments $8.5 $8.5 </p>
<p> Interest charges $15.0 $27.8 </p>
<p> Total potential federal liability $33.9 $55.9 </p>
<p> Source: Energy Resources International. </p>
<p> Figures are reported in constant 1997 dollars. </p>
</p>
<p> Federal inaction also could cost ... </p>
<p> s $1.2 billion (em for utilities to build stainless steel containers at the plant site in 34 states if federal storage facilities are not built; </p>
<p> s $9.2 billion to $18.4 billion (em for utilities to safely manage on-site fuel storage, at $4 million to $8 million per utility; </p>
<p> s $8.5 billion (em in relief payments made to utilities and electricity customers from the Nuclear Waste Fund; </p>
<p> s $15 billion to $27.8 billion (em for recovery paid to consumers in recognition of lost opportunity for alternative uses of money paid into the fund since 1983, plus interest. </p>
<p> (em Nuclear Energy Institute, </p>
<p> Washington, D.C. </p>
<p> Federal Liability? </p>
<p> Winstar says it's unmistakable </p>
<p> The Law. Generally speaking, a private citizen cannot sue the federal government and recover damages for breach of promise. That would violate the government's "sovereign immunity." To prevail, the plaintiff must prove that the sovereign has waived its immunity in "unmistakable" terms. </p>
<p> The Issue. Has the DOE waived its immunity against a suit for damages for failure to accept nuclear waste for storage? </p>
<p> The Winstar Rule. In the case of U.S. v. Winstar Corp.,* decided July 1, 1996, the Supreme Court ruled that the new buyers of three failed savings and loans could recover damages after Congress enacted the Financial Institutions Reform, Recovery, and Enforcement Act of 1989. That law had effectively "repealed" promises made by Federal Home Loan Bank Board that the buyers could treat any excess takeover price as "supervisory goodwill" and include that intangible amount as part of the new bank's minimum required capital reserve account. </p>
<p> The High Court ruled that in promising favorable accounting treatment, neither the bank board nor other federal agencies had circumscribed their authority to modify banking regulations or any other sovereign powers. Hence, the doctrine of unmistakability did not bar the suit. </p>
<p> The Implications. As applied to nuclear waste, Winstar might imply that utilities can sue the DOE (em the theory being that DOE's promises to accept nuclear waste have not otherwise restricted the government's sovereign authority to modify or promulgate new regulations. </p>
<p> *116 S.Ct. 2432, 135 L.Ed.2d 964. </p>
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Thu, 15 May 1997 04:00:00 +0000puradmin10168 at http://www.fortnightly.com